Purchasing Foreclosures Outside of Auction

By: Craig Berger

With the housing market in a slump, it may seem like a good time to get a good deal on a foreclosed home. Although foreclosures are increasing across the country, you will not get the best bargain at an auction. Consider options outside of an auction with these other methods of purchasing a foreclosed home.

Why Foreclosure Auctions Are Not The Best Deal

When you attend a foreclosure auction, you compete with local investors. These professionals know how much a property is really worth. They will either beat you to the punch or back off so you pay more than its real value. Moreover, many foreclosed homes have a huge mortgage, so banks incorporate that cost into the total starting price.

The market predicts that foreclosed homes will quadruple in 2008, which means there are plenty of choices available. Instead of attending an auction, look for bargains by finding out what the foreclosure laws are like in the state you want to buy. Sometimes they start when the lender sues the homeowner for failing to pay the mortgage, yet no matter how it begins, foreclosure filings are public documents that allow you to contact the homeowner directly.

Foreclosure 101 -- How To Buy Without An Auction

A more effective to way to purchase a foreclosed home is through a 'preforeclosure,' in which you buy straight from the homeowner. Unlike an auction, the buyer and seller are able to negotiate. This means your likelihood of scoring a great deal on a home greatly improves. You also get to send out a home inspector, which is highly recommended whenever purchasing property.

Another approach is buying a home that could not sell at an auction, and has been put back on the market by the bank. These 'real estate owned' houses, or REOs, are usually better for first-time buyers. Work with an experienced Realtor and be realistic about your offer.

Foreclosure Do's And Don'ts

Remember, the homeowner is not the bank. You cannot just show up and expect to see the home. Send a letter and follow up with a phone call.

Always thoroughly research the properties that interested you. Avoid places with tax liens, multiple mortgages or other legal issues.

Buying a foreclosed home takes patience and diligence, so do not be discouraged if you cannot find something right away. However, with so many homes flooding the market, the chances of finding a good deal are not that difficult.

Foreclosures
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