5 Things You Should Know Before You Buy A Foreclosed Home

You would be hard pressed to turn on the evening news these days and not hear a story about foreclosures

. Unfortunately more and more homeowners are losing their homes to the bank. While it is a fact of life today the only way the US economy is going to improve is to take these homes that banks call, "Non-performing assets" and make them performing again.

Maybe you have a friend that bought a home from the bank that was a good deal, or maybe you are looking for a home to live in or invest in and have decided that foreclosures are the way to go. It would be hard to miss them if you are seriously looking for homes in today's market. In fact in many metropolitan areas foreclosures make up nearly 40% of the homes being sold on the MLS.

Before you jump in head first let's look at a few things you need to think about before you buy a foreclosed home from a bank.

1.Not every foreclosure is the best deal. Yes I know the banks want to sell but they are also business people with very rigid guidelines. If a home is in great shape and in a great neighborhood the bank is going to try to get top dollar for the property. They understand the market and realize the good ones sell first. Don't be surprised if the bank wants a lot of money and they don't move much on the price.

2.Understand your market. Hopefully you are working with a good realtor that knows your market. A good realtor will help you know if a home is a good deal for your market or not, regardless of whether it is a foreclosure or not. Just because it is a foreclosure does not mean it is priced below market. Know your numbers. A home is a major investment and you should treat it like one.

3.Find a good REO (Real Estate Owned) Agent/Broker. These are the real estate professionals that the banks employee to list and sell their homes. If you want the best deal it is often beneficial to go to the source, the broker listing the house. An REO agent will have multiple foreclosures listed and may be able to help you find a good deal. They also know their bank clients and know what they will and will not negotiate on. Save your self some time and build these relationships. We have a great video where our REO agent shares his personal experiences.

4.Where's the money? Banks are being inundated with offers to purchase homes from buyers that have no idea where they are going to get the funding to buy a foreclosure. Don't be one of them. Before you start looking for a foreclosed home make sure you have your financing in place and have a written letter stating it. Banks will not even look at offers without a "proof of funds" letter.

5.Have a plan. If you want to buy foreclosed homes as an investment strategy, and I highly recommend you do in this unprecedented market, then you need a plan. You will not get every foreclosure you put an offer on and you need to plan for it to be a numbers game. Decide where you want to buy and exactly what type of house will be your target property. I promise it will save you hours of time and a lot of money if you know your perfect deal before you ever look at one.

With these items in place you will at least be ready to start looking at foreclosed homes. These homes can be great opportunities find your personal residence that will grow in value and create equity for your financial future. If you are interested in investing in real estate then you must consider adding buying foreclosed homes to your real estate investing tool box.

by: Allison McArthur

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