Tips for buying a foreclosed home
Posted February 13, 2009
Updated March 9, 2009
Raleigh, N.C. — More than 2.3 million homeowners faced foreclosure proceedings last year. With so many foreclosed homes on the market, you may be thinking about buying one. But buyer be warned, it can be a risky purchase.
The safest way to buy a foreclosure is to find one that didn't sell at auction, and is listed on the MLS database for real estate listings.
"At least half of the buyers that I work with will bring up a foreclosure,” real estate agent Kelli Kaspar said.
Kaspar said the first thing she ask those buyers is how they plan to pay.
"If you're paying with cash, not a big deal. If you're getting a loan, there are certain loans that will not finance a home that is in bad condition especially FHA (Federal Housing Administration), VA (Veterans Affairs) or some of the loans that don't require a lot of money down,” Kaspar said.
You can view a home before buying if it is listed on MLS. However, that is not an option with courthouse foreclosure auctions.
“That's one of the biggest and scariest things about buying a foreclosure,” home buyer Joe Allercia said.
Allercia said buying at auction is also time consuming.
"For every house I purchased, I probably researched at least 100 to 200 homes,” Allercia said.
If you are the highest bidder at auction, you put down 5 percent of the selling price on the spot.
Allercia said you must know the local real estate market so you don't overpay. Also, don't expect conventional financing since it is nearly impossible without an appraisal.
You should also "know how much it costs to fix properties up, (such as) HVAC, plumbing, electrical, painting,” Allercia said.
Otherwise, a foreclosure that seemed like a good deal could end up costing you more money than the home is worth.
A real estate agent or courthouse auction listing is not the only way to find out about foreclosures. You can subscribe to RealtyTrac and many building supply companies also have foreclosed properties for sale.