Buying forecloses homes involves more time and thought than when buying traditionally. Although the process can save you money, it can also cost more if you are not careful. Foreclosed homes often suffer from damage or neglect.
Sometimes these needed repairs are the result of an owner not having enough money to deal with them in the first place, other times they are the result of an angry owner trashing their property so the foreclosure company would not make as much from the sale.
Here is a brief guide to get you started if you are considering buying a foreclosed home.
1. The most important factor in buying a forecloses home is budgeting. Plan on money upgrades or repairs. You still want to put make as much of a down payment as possible. This will keep later mortgage payments low. Being unable to meet high mortgage payments is one of the reasons many people lost their homes to foreclosures.
2. Get a pre-approved mortgage. This is a must for any home buyer and will put you ahead of your competition. When sellers have two offers, they will frequently go with the one that was pre-approved.
3. Decide what features you “Must Have” and what features you “Want to Have” in a new home. This might include the number of bed rooms, bathrooms, or yard size. How much time are you willing to invest on fixing the home?
Make your “wish list” and take it with you on home showings, make notes of what each house had, or didn’t have.
4. Search for Foreclosures on line, sites such as the U.S. Department of Housing and Development. There are many other on-line sites for finding homes that have been foreclosed upon, as well as local newspapers.
5. Using a Real Estate agent is a good idea for first time buyers, not only will they guide you through looking at homes, but through the purchase, and legal matters, as well. They will save you a lot of headaches in the end.
Also your agent will know more about the areas within the city you are considering buying and can guide you to the better ones. Find an agent who has handled foreclosures before and is familiar with handling them. There is more paper work involved in dealing with foreclosed homes.
6. If you are interested in any properties, have the Real Estate agent plan a viewing of the homes for sale that you are interested in. This is a much better way of viewing a home than by attending an Open House, although you can certainly do both.
Have your “wish list” handy, and take your time. Your agent should be one who will point out flaws and positive features too.
7. Another way of purchasing foreclosed homes is through planned auctions. They usually have viewings prior which you should certainly take in. Check everything, from electric, to pipes. Remember foreclosed homes often have several needed repairs. On the day of the auction you will make your bid.
You may want to attend an auction for a home you are not interested in earlier, so you know what to expect from them. You will have to make a cash payment on the day of the auction and have a limited time to arrange the balance. All this will be covered in the auction details.
Good Luck and have fun purchasing your first home!