Before Purchasing a Foreclosed Home

Foreclosures continue to increase while house prices start to deteriorate, making homebuyers save a lot of money on houses already acquired by lenders or banks. RealtyTrac.com reported that foreclosed homes were priced 25% below full house market value.

But a lot of these foreclosures belong to homeowners who invested only little. Some did not even have equity. In that case, buyers may only get 10% discount at the most.

Certified Commercial Investment Member (CCIM) Zalman Velvel buys and sells foreclosed homes for more than 20 years already. He warns new buyers interested in foreclosures to know the problems involved.

He stated that doing a title search is important to make sure that the property has no secondary liens or encumbrances.

There may also be some repairs as foreclosed homes cannot be inspected unless it is considered sold, so be prepared for those.

A lien, which comes from taxes that are unpaid, is something to watch out for too, as buyers are going to be responsible for it.

3 ways when buying foreclosures:

• Pre-foreclosures – house can be bought straight from the homeowner and only has little capital. It can be inspected and needed information is there.
• Auctions are the riskiest, but can sometimes gain profit of 40 percent on auction foreclosures. The house cannot be inspected prior to the auction and payment for the property won should be paid in cash.
• Real Estate Owned (REO) houses is not risky as buyers will have the chance to inspect the house, can ask for a clean title and obtaining a mortgage can be applicable to the purchase. However, buyers may be unable to get a good deal as they may have with pre-foreclosures and auction.

There are many problems that buyers may face when buying foreclosed homes. Make sure to know everything to avoid hassles.

Velvel stated that having a preferred area is better when finding good deals in foreclosures, but if it is available in the chosen area, go ahead and buy it.