Buying foreclosed properties is a worthwhile investing strategy for new and old investors in the real estate market. If worse comes to worst, you end up saddled with a property that might actually be worth a lot years from now.
If you are interested in buying foreclosed properties, here is a simple step-by-step guide on how to do it.
1. Find a property. There are many ways to find foreclosures. There are real estate agents that specialize in foreclosures and all you have to do is contact them to get a list of foreclosures. You can also drive around the neighborhood and look for houses that have "Foreclosure," "Bank-Owned," or "Bank Repo" signs. Contact the real estate agent that is listed on those signs and ask about the property and other foreclosures in the area.
Bank websites are also a rich resource for foreclosures. Major banks like Countrywide, Bank of America, Chase Mortgage, and US Bank keep a list of bank-owned properties on their web sites. Foreclosures can also be found on the web site of asset management companies, government agencies like HUD and Fannie Mae, auction houses, and Internet foreclosure companies.
2. Think about how you will pay for the property. Do you have enough money in your savings account to buy the property? If your answer is yes, then you can proceed to the next step. If the answer is no, then you have to find money to fund your purchase. You can approach your bank for a loan, or any other financial institution of your choice to secure financing.
Why do you have to do this now? A homeowner or lender will be more serious in taking offers from potential buyers who submit a concrete plan on how they will pay for the property.
3. Contact your local real estate agent. This agent will serve as your guide to the process of buying a foreclosure so choose one with experience. Having a real estate agent can make the process smooth and easy for first-time buyers.
4. Establish contact with the property owner and find out how you can make an offer. To find out who to contact, check the foreclosure status of the property. If the property is in pre-foreclosure, then contact the homeowner. If it has been foreclosed already, then contact the trustee. If it's a bank that owns the property after foreclosure, contact its REO or asset management department to find out how to make an offer for the property. If the government took possession of the property, find out who the listing agent is for the property and establish contact. You can usually determine the listing agent online.
5. Make an offer. Here is where a real estate agent will come in handy. Your offer should be based on the estimated market value of the property less the homeowner's outstanding loans and liens and estimated repair costs. Submit the offer to the homeowner, bank or listing agent. If the property is in auction, you have to make a bid during the auction.