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Tips on Buying Foreclosure Homes

Tips on Buying Foreclosure Homes

In the present day and economy, buying foreclosure homes is something that appeals to many. The current conditions make it a perfect time for the small or first-time investor to purchase foreclosed homes for themselves, as rental properties or for resale in the future. Foreclosed homes come in all shapes, sizes and conditions and may fit into many budget levels. And, although it’s possible to get some at up to 40% below market price, most foreclosed homes will only sell at about 5% below market value.

When you’re looking into buying forclosure homes, you will benefit from doing the proper research. There are some exceptional buys available, but they require the necessary research and mindset to make them your own. Foreclosure starts when the home owner falls behind on mortgage payments. It’s not uncommon that the owner has been struggling for quite a while to make the payments and this can mean that any upkeep on the house has been sacrified for just making the mortgage. This makes it tricky for you as a buyer. While you may see a potentially sound home at a low price, the repairs and updates that may be necessary could be more expensive than you’re willing to bargain for.

Once the lender decides to foreclose on a home, a notice of default or a lis pendens (Latin for “lawsuit pending”) is filed. This is how you can first locate a home that’s in foreclosure because this document is a public record. You can also buy magazines and sign up for newsletters or membership websites that help in buying foreclosure homes.

After you’ve located a home that you may want to purchase, look for liens on the property (usually placed when property taxes aren’t paid) that can raise the price. Of course, you should also definitely do your research on the estimated values and sale prices of other properties in the area.

Many banks hire a real estate agent and sell foreclosed homes through them. But if you’re just starting out as an investor, you probably want to try buying the home directly from the lender. Bank-owned properties are considered the safest deal for inexperienced foreclosure buyers because there’s no risk, no taxes, no liens, and no tenants to evict.

There is such a thing as “hidden foreclosures” as well. These are homes that were in the process of being built when the money ran out. So, the banks that were funding the construction loan take them back and try to sell them through real estate agents. They are referred to as hidden because they are never called foreclosures by anyone who is involved in the selling process.

Buying foreclosure homes to then rent out can offer valuable tax deductions to buyers as the house increases in value and builds equity. With many other investment opportunities down, foreclosure real estate investing could be the route that’s right for you.

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