It’s a hard truth that you can stand to take advantage of the misfortunes of others but finding the right foreclosure home can mean saving a lot of money as compared to conventional home buying. The rising numbers of foreclosures is creating a lot of opportunities for owners and investors to get their hands-on homes that are getting reclaimed by lenders. These homes are often typically sold far under the actual market value since owners are often ready and willing to unload them quickly.
There are risks associated with such cheap prices, though. You might wind up with a home that carries an associated mortgage or even a lien with it, and sometimes it’s difficult to impossible to get an inspection done prior to the sale, meaning you could find anything from a flooded basement to mold.
Still, if you’d like to roll the dice or feel you can manage such risks, then keep reading into the following paragraphs to learn a dozen tips on how to buy foreclosed homes and also identify the best possibilities among the leads you generate:
1) Search the websites of banks, mortgage lenders, and other financial institutions:
National banks might have all their listings across the country there, but also check out local or regional banks who cover markets you are actively interested in so you don’t miss anything. You’ll see prices, home descriptions, photos, and the contact information of associated agents. Do expect limited listings though, so it’s best to check out such sites frequently but quickly so you don’t waste too much time. Also review the online listings of Freddie Mac and Fannie Mae, as they buy mortgages from banks and other institutions.
2) Look into listings from the federal Department of Housing and Urban Development:
HUD at any time might have tens of thousands of homes if the prior owners had the federal government insure their mortgage. HUD homes often go on the market a half a year after a foreclosure, with local municipal governments getting the first crack at buying them. The second group of buyers are owner-occupants intending to live in the home, who buy roughly half the available total listings. Investors are allowed to buy roughly a week and a half after.
3) Visit any offices your county has:
Foreclosure information is often filed at county-level offices, and many of them make this information available online. You might even be able to search individual streets and ZIP codes, knowing what’s available before the next bidding session.
4) Enlist the services of a foreclosure-listing agency:
Some businesses, like ReatlyTrac, can provide you comprehensive foreclosure listings for basic fees. Look for packages that might cost you fifty bucks a month but give you access to a database of nearly a million foreclosure listings, often three-quarters of all national data. Listings will include homes currently in foreclosure or those approaching it.
5) Partner up with a real estate agent:
Real estate agents typically know about local homes that getting close to foreclosure since they know the local market, and network with both fellow agents and lending institutions. Real estate agents can help you find great deals that aren’t yet under contract.
6) Know your financial parameters:
It can be tempting to figure out how much money you have to spend on a foreclosure, find a property that’s going to sell for about how much you have to spend, and then buy it thinking you’re getting the most bang for the buck. Unfortunately, it’s a serious mistake. The lower the price, the more work a home is likely to need, and even higher-end foreclosures were owned by cash-strapped occupants who likely neglected maintenance and upkeep. There might also be issues inherited regarding property taxes, liens, or even the mortgage itself. Leave yourself financial breathing room to get the property up to par even after you spend first to buy it.
7) Check out the home for yourself:
Never buy a home sight unseen. Someone needs to look at the home with their own eyes. Even if you can’t go in physically or have an inspector join you, doing a drive by, walking the outside, and looking in the windows can tell you quite a bit about what you might be getting into. This still needs to be done even if you’re investing in another market. The online nature of much of the listings means someone in New York or San Francisco can invest in properties in smaller and cheaper markets like Tucson or Bismarck. You still need someone local to go check it out with their own eyes. Fortunately, you can find such labor online too.
8) Check out the surrounding neighborhood too:
If a particular area has a lot of crime or many other foreclosures, you might not recoup what you invest into repairs or get good rental income. However, a neighborhood of high average home values with good jobs, amenities, and schools can be attractive.
9) Find out how long the home has been vacant:
Some foreclosures might have been sitting empty for months, which will mean more damage. A home can be carefully ‘mothballed,’ but many aren’t, meaning the sewer bugs can come in, sewage gases back up, and plumbing starts drying out.
10) Check the pipes before you turn on any utilities:
One cold spell can crack the pipes, letting water leak into the flooring and walls. You might even risk mold if the water comes back on before the home is ready. See if the home was winterized properly.
11) Go over the landscaping:
Fortunately, you rarely need access to the interior of the home to check this out. A neglected home can bean bushes, vines, and trees going untrimmed, which can mean anything from cracked windows to foundation damage.
12) Get the home inspected:
If you buy conventionally, you would never sign a deal on a home without a thorough inspection. It’s not always possible in the case of foreclosures, but whenever you can, get an up-to-date inspection from someone you trust rather than relying on someone else’s possibly out-of-date information or reports. If need be, do it immediately after you buy a foreclosure, so you know exactly what you’re up against. See it to it all necessary repairs and demo are done before upgrades or renovations are committed to.
Whether you’re looking for your own next home, an opportunity for rental income, or just a profitable flip, finding the right foreclosure is a great way to get these dreams done. While not every one of these 12 tips might apply at all times to the markets you are active in, use any of them you can to not only find foreclosed homes but also the best possible scenarios in this risky yet rewarding section of the housing market.