Steps to purchase a foreclosure

Recently on our bankruptcy forum a user asked, “My husband and I are considering buying a home foreclosure. We are wondering what steps we should take to ensure that we get a good deal.”

Although the number of home foreclosures was down last year to the lowest level since 2008 when home foreclosures spiked to a whopping 2.9 million homes, there were still over one million homes foreclosures last year. With all the foreclosures on the market it is possible for the savvy home investor to find some great deals, assuming they know what they are doing and they take the right steps to find a good property.

Steps to find a great foreclosure home

Before doing anything else, you will want to decide whether or not you want to hire a real estate agent to help you find the property and negotiate the sale or if you want to purchase the home at auction. After you have made this decision you will need to take the following steps:

  1. Determine how much you can afford to pay for the home.

Before buying any home you need to determine how much you can afford to pay for the purchase. Costs can include not only the mortgage payment, but also property taxes and insurance. Buyers can also streamline the home buying purchase by getting pre-approved for the loan. Be sure and talk to a mortgage lender about all of the different loan options available to purchase a foreclosure.

  1. Find the right home.

Finding a foreclosure is now easier than ever. Searching the internet and reviewing on line real estate listings and websites is one of the first places to start. Simply search “foreclosures for sale” or “REO properties.” You can also review ads in the newspaper and talk to a real estate agent.

Another option is to purchase the home at an auction. To find auctions in your area simply search for foreclosure auctions.

  1. Determine the condition of the property and offer a reasonable price.

The next step to purchase a foreclosure is to determine the condition of the property. The bank may own the property, but they will probably have very little information about its condition. Not only will you need to complete a professional home inspection, you will also need to determine how much out-of-pocket money will be needed to repair the property.

After the inspection is completed you should have a good idea of the condition of the home, how much it will cost to make the estimated repairs, how to make a fair and reasonable offer, and what type of loan you will need to fund the purchase of the home.

  1. Be prepared to pay for a significant amount of expenses up front.

Buying a foreclosed property is similar to other homes, in this respect (with the exception of potential repairs). There will be a significant outlay of cash at the time of purchase. Fees can include the payment of the earnest money, an appraisal, and a home inspection.

  1. Verify the homes title.

Finally, before making any purchase, make sure to very that the property has a clear title. Do not buy a property that has any liens on the title.

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Beth L. is a content writer for Better Bankruptcy. Good content and information is one of many methods we utilize to bring you the answers you need.