Foreclosure Homes for the Fainthearted

By: philip smith

Their profile looms larger, foreclosure homes are coming out of the shadows to be more of an opportunity as a way to buy your family home sooner than you expected. Just how familiar with investors' gambits do you have to be to buy at a price that means you will have cash for the inevitable repairs and replacements yet still pay less than you would for a home you could walk into tomorrow?

Of the three stages of foreclosure, the final stage, when the home has failed to sell either before or at auction, is usually recommended for the beginner or first-time foreclosures buyer. That's because REO status has some benefits over pre foreclosure such as a title free of debt and straight forward negotiation with unemotional lender-owners, and over first time buying at auction or sheriff sale. If you are buying with the intention of a long term investment in a family home, then, apart from some precautions to take over the state of the property, then the differences in procedure and paperwork will be efficiently dealt with by your realtor, and much of that investor speak can pass you by.

Buying at the auction may seem like a challenge that once met carries a swagger, but is best left to the investor who knows his state foreclosures laws, has access to a line of credit or hard money, and knows when to stop bidding. Auctions scheduled on many courthouse steps are cancelled or postponed, as owners anxious to save their homes work out a way. The competition at the auction is not just from the real estate investor pros in town, but from the lender or lenders who determine the upset price.

Buying a home in pre foreclosure, before the auction is certainly more challenging, there are many pitfalls to avoid, and unless you want to pay close to fair market value in order to avoid a complicated short sale situation, you will have to know the various ways to structure a deal that will work for three parties.

You are going to find opportunities to buy at a discount at both ends of the foreclosure timeline. Your challenge will be to preserve a big part of that discount and not squander it on nasty surprises. Common sense, smart searching of foreclosure listings and the prudent use of expert advisors, your realtor, appraiser and attorney, will get your new home soonest.

Foreclosures
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