Depending on where you live and how familiar you are with the foreclosure process will determine how you view to Buy a Foreclosed Property. To some people it is attending an auction and making a bid and to others it is negotiating a sale with the bank, who now owns the foreclosed property. In reality there are three ways that a foreclosed property can be purchased, and each one has its benefits and drawbacks.
The first one is the preforeclosure sale. There are times when you find out a home is going to be foreclosed upon, and at this point you can offer to buy it from the current owners. Here you can possibly do the most good, since the current owners will be able to control the damage to their credit a bit better and the banks usually like to get out from under the loan amount.
The catch is that you usually have to pay what is owed on the property. A related method is the short sale, which is where you offer to buy the home below the loan amount and the bank agrees to sell it at a loss to avoid the expense of foreclosure or repossession. The problem with short sales is that the current owners could find a way to become current on their loan or the bank could change its mind and not sell for that price or any other detail could go wrong and cancel the sale.
After the home is foreclosed upon it may go up for public auction. In many places, purchasing a home this way is rarely as easy as it seems. First the rules of the auction usually keep many homes from being a bargain; they must be sold for at least a dollar over what is owed.
Second, to hold the home to find financing usually requires a large deposit and then actually finding financing can be difficult. In some local markets, the auctioned property can come with liens that you are now responsible for. Be sure to know what your local laws are before purchasing an auctioned property.
The safest way to purchase foreclosed properties is to negotiate with the bank directly. There are many circumstances that the bank can sell the property directly or with the help of a real estate agent. Here the bank can agree to sell the property at a small loss or at costs, which could save you thousands.
If the bank is selling as is or sight unseen, be sure to do your homework and learn as much as possible about the property in question. Otherwise, you may be stuck footing the bill for a damaged interior and cutting into or losing any potential profits completely.
As you can see entering into the investment market is not for the faint of heart, but for the brave, there are deals to be found and profits to be made. Be sure to hire the proper professionals, such as a real estate attorney or tax professional, and do your homework so you know what you are purchasing. This way your investments are more likely to turn to gold.