Steps in Purchasing a Foreclosure Home
Buying a foreclosed home is not like buying a regular home. The legal steps and procedures may be different, and a lot more may be involved. "Buying a foreclosure is definitely a bit of a grind. It's not easy," says Robert Jenson, owner and founder of the Jenson Group at RE/MAX Central in Las Vegas. "You're getting fantastic pricing, but sometimes it takes going through a lot of houses and writing a lot of offers to get the home you want." 
There are pros and cons to buying foreclosures. You take what’s there. The seller isn’t going to make any repairs – that will be on you. You won’t be able to negotiate much on the price, either. The lender wants his money up front. However, if the house is vacant, you might not have to wait as long as for one that is still occupied. You may be able to do a short sale, where the lender will sell for less than the debt because the owner can’t make the monthly payments.
Your first step is finding the right real estate broker, one who has had experience in foreclosures, and one tied to the bank that owns the foreclosed home. The real estate agent may know of houses that haven’t come on the market yet. Start studying the prices of the homes in the area – know in advance if the price is too high. Look through ads listing foreclosures, both on the Internet and locally. It’s generally better to go through the bank’s broker so that the commission doesn’t have to be split.
Don’t make the mistake of looking for the house first and then trying to get credit from a lender. That takes too much time and others may get the good deals before you. This doesn’t mean borrowing from the lender who is foreclosing. You’re dealing with a different department, one that is trying to get rid of a bad deal. They aren’t loan officers and they aren’t interested in re-financing. You’ll have to find your own financing. You’ll need a preapproval letter from them, stating how much you can borrow based on your credit score and income level.
Once financing is in place, actively look for the place you want. Scan through foreclosure listings in newspapers, real estate magazines and the Internet. Call lenders for their lists of foreclosures for “REO” or real-estate owned properties. Also contact government agencies such as Fannie Mae, at fanniemae.com, and the Department of Housing and Urban Development at hud.gov. Check public records for notices of default for early tip-offs of possible foreclosures.
Once you’ve found a house, do your homework. Tour the property and have it inspected, if the seller will allow it. Find out what repairs will be needed, such as air conditioning or furnace repair, and damage from pests, mold and leaks. Have your broker check the prices of nearby homes to see if it is comparably priced. Check to see if the property has any other liens on it such as unpaid property taxes. Find out who is liable for these liens.
If your research tells you this is a good deal, talk with the lender who is foreclosing. This is important in that it shows that you are serious about buying. A busy broker will pay attention to your offer due to pressure from a lender. Although the bank may agree to a discount, as much as 30 percent, the offer will depend on how many potential buyers and how quickly homes like the one you are looking at are selling. Don’t expect the lender to lower the price for “needed repairs” – they are interested in getting rid of the property, not throwing good money after bad.
"The best advice on a bank-owned property is to come in at your highest and best, unless the property has been sitting on the market forever with no activity," Jenson says. "If you're going to be upset because you would have gone $5,000 more, but you lost the property, just bid the higher price in the first place."
In conclusion, be prepared to deal with more paperwork with a foreclosure than you would otherwise, especially when purchasing from a government agency. Search for the best mortgage rate you can find. Do your homework so you don’t receive any unpleasant surprises. While time consuming, your reward may be a bargain-priced home.
 http://www.ehow.com/how_111013_buy-foreclosed-home.html Retrieved February 19, 2012
Photo courtesy of basicgov via Flickr