5 Things to Know Before Buying a Foreclosed Home

If you’re considering buying a foreclosed home you’re probably looking for a bargain. Foreclosure homes typically sell for less than other homes on the market but there are some things you should know before signing on the dotted line.

#1. How to buy a foreclosure home.

There are basically two different ways to buy a home that is in foreclosure. First off, lenders will auction the home off after the owners stop paying the mortgage. These are typically sold at public auctions. However, since most people don’t have a few hundred thousand dollars in cash lying around,  you’ll want to buy the property after  a bank takes ownership of it. These are bank owned properties sold by real estate agents. This is where most people buy a foreclosed home and it is sold in the traditional way.

#2. Buying a home at an auction.

If you’re buying a home at the auction it’s typically not easy and most of these auctions are site unseen. You’ll be competing with professional real estate investors so you’ll need to have several hundred thousand dollars in cash in order to bid. Also, because these are site unseen you have no idea what type of repair jobs you’ll face after the purchase.

#3. A bank owned foreclosure is easier.

Instead of an auction, going through the bank is an easier process and homes sell for up to 40% less than comparable homes that are not foreclosed upon. Once the bank has taken ownership of the home you would make an offer just as you would with a typical sale. There will be a real estate agent representing the bank that will present your offer to the bank and come back with a counter offer.

#4. Banks usually will not complete any repairs.

One of the drawbacks to buying a foreclosure is the bank will typically not conduct any repairs, replacements or alterations of the property. It’s basically what you see is what you get. And this leads into the last point.

#5. You absolutely need a home inspection.

Never buy a foreclosed home without hiring a home inspector. You do have the right to a home inspection before closing on the sale. Many foreclosed homes need a ton of repairs so you want to know exactly what you’re getting into before finalizing the sale. You might determine that after knowing what all needs to be done on the property it’s not quite the bargain you had hoped for.

For more information on home inspections, visit the American Society of Home Inspectors of Western Washington.