Prepare Your Resources
You’ll need to make sure you’re armed with the resources you’ll need to buy foreclosed properties. Tip: Start a foreclosure list file to organize all the documents and research that you’ll accumulate during the process of searching for and buying a distressed property.
Find a Good Source for Foreclosure Listing
Thanks to the advent of the Internet, you no longer have to depend on printed listings to be mailed to you. In any case, there are several questions you can ask of any foreclosure listing service to help determine its usefulness.
Decide Whether You Want to Use an Agent
If you’re a first-time homebuyer and you’ve never purchased a home, let alone a foreclosed property, it may be beneficial to contact a local real estate attorney or consult an agent experienced in buying foreclosures. If you work with an agent, make sure they know your priorities. Not all agents have much experience with foreclosed properties, so ask any potential agents if they have experience with foreclosure help and sales. Especially for first-time buyers, a good agent can be a comforting and helpful resource.
Make a Checklist of What You’re Looking For in a Home
Your foreclosed property checklist should include as many factors as you can and then prioritize them. You may not ever get the perfect home, but a checklist will help keep focus so you’ll know when you find a property that will work for all your needs and wants.
Find Properties That Match Your General Criteria
A good listing service like Eagle Realty Group and Associates will allow you to input search criteria based on your checklist. When searching for a foreclosed home for sale you may want to start out with a broad foreclosure listing search and then narrow it down to a few foreclosure property listings if you end up with too many properties. Experiment with different searches to see what you get in different areas, price ranges or square footage. Print out the detail on all the foreclosure property listings that spark your interest. Make a habit of continuing to check for new foreclosure property listings or have the listing service notify you when a property is added that matches your criteria.
Narrow the Focus
Start checking out your foreclosed home for sale properties. You can try to call the trustee to confirm the status of the property, although not all trustees are as helpful. Or you can easily narrow down your foreclosure search to a city. Foreclosure properties may not offer the opportunity to view the inside at first, but just looking at the house and the neighborhood will allow you to scratch some off your list and highlight others. Take a list of questions to try to evaluate the foreclosed home for sale based on your checklist. Make a note if any properties are already listed with a real estate agent.
Do Your “Home” Work
Once you’ve narrowed down your list of real estate foreclosure properties, start doing your homework and foreclosure free search on each property to find out if this is a property that will be a good bargain and a good fit for you.
What You Need
You need to find out as much as you can about the foreclosed house and the circumstances that contributed to its status as a distressed property. The primary sources for this information are county assessors and recorders offices, title companies, your agent and the owner. And you want to look for information from unexpected sources also. There are some occasions when interested buyers have gleaned a wealth of knowledge from a neighbor who happens to be outside while the buyer is driving by to look at the property.
To determine whether a foreclosed house is a good buy or investment, you need the proper tools to research sales comps, property history, title status and other data that might affect the value of the property. Of course, before you close the deal on any property, we recommend that you do a complete title search through a title company.
If you have a referral agent, they have access to title information and can do much of the research for you. That doesn’t mean you should sit back and wait for the agent to do all the work. If you continue to work on finding out as much information on your own, that not only will make your search more effective, it will also show your agent that you’re a motivated buyer who’s willing to put in some work to get a good bargain.
Calculate the Bargain
Ultimately, the purpose of all your real estate foreclosure research is to decide whether a given distressed property offers a good bargain-buying opportunity. To the outstanding unpaid loan balance you need to add all the liens against the property and any estimated fixing costs and then subtract that total from the market value of the foreclosed house. If the difference is a strong positive number, you can approach the owner armed with your calculations and begin negotiating a possible sale.
Gather financial information the lender will request and apply for pre-approval. Educate yourself on the lending process and what steps will be required.
Check your credit and correct any credit problems you may have before the lender gets your credit report.
Pass the Baton
Take your short list of properties and hand it over to your agent. Many experienced buyers and investors prefer to buy foreclosure properties without the help of an agent, but if you’ve never done this before, it’s a good idea to enlist the expertise of an agent who has knowledge and experience in buying distressed property. These agents can scout out your picks and help you with the next steps in buying a foreclosure: researching property title documents, contacting the owner and making an offer. You will need to sign a buyer/broker agreement with the referral agent so they can work on your behalf.