Buying a Foreclosed Property

August 4, 2009
Michael Sheehan

Some experts estimate that distressed properties now account for almost a third of home sales nationwide. But buying a foreclosed home is not like a typical real estate deal and real estate mavens have some tips for would-be bargain hunters.

Home sales are finally beginning to heat up with much of the action coming from investors and first-time home buyers who are snapping up bargains in foreclosed properties. Some experts estimate that “distressed” properties now account for almost a third of home sales nationwide. But buying a foreclosed home is not like a typical real estate deal and real estate mavens have some tips for would-be bargain hunters.

The first thing to do, say the experts, is to get pre-approved for a mortgage. Foreclosed homes often sell quickly, so if you wait until after you find a property you want before getting a lender to approve your mortgage, your bid probably will be too late. And don’t expect the bank that’s selling the house to offer you a mortgage; they just want to sell the property. The next job is to find an agent. Most lenders work directly with one or two real estate brokers, who know which properties are being foreclosed and often know of listings that haven’t shown up on the bank’s database yet. Searching Web sites that list foreclosures can help you find an agent.

Prices on foreclosed homes are generally not negotiable; you submit your bid and high bidder gets the house. You should research what comparable properties are selling for and, based on those figures, go in with your best bid up front, say the experts. One exception is if the home has been languishing on the market for several weeks with no action. You also should realize that the house is sold “as is” and any repairs are your responsibility. Don’t shave dollars off your bid because of potential repair costs.