1. Budget for the Unseen
While the house may have a low price tag, the purchase price is not necessarily the only cost; repairs will also probably be needed. Some repairs may prove to be minimal, such as replacing a doorknob or patching up holes in the drywall. Other repairs, such as plumbing and electrical reconstruction, probably require professionals and a small investment.
2. Take Your Time and Look Over the House Closely
When buying a foreclosure, see the property yourself; do not rely on pictures. While you are looking at the house, take your time and examine the house thoroughly. No matter how much the home is reduced due to its foreclosure status, a house is still a major purchase that warrants careful inspection.
3. Do Careful Research
Find out how long the house has been on the market. This information will help you budget for those necessary, unforeseen repairs. The longer the house sits on the market, the less likely it has been properly cared for.
For example, if the toilets are not in use, sewer gases could back up, or vermin may have infested the area due to untended lawns.
4. Hire a Home Inspector
More likely than not, a home inspection fee will come out of your pocket. While inspections also fall under the category of housing expenditures that are not part of the home’s purchase price, this expense is foolish to forego when buying a foreclosed home.
Careful, thorough home inspections can show you what your untrained eye cannot. For example, you may not know that you are purchasing a home with no insulation. The inspection will reveal the absence and you can then calculate home improvement costs.
5. Know the Value of the Home
Find out the appraised value of the home. Typically, the amount a foreclosed home is listed for is the amount left on the unpaid mortgage. While this initially sounds like a good deal, situations exist in which the amount remaining is higher than the value of the house.
6. Do Not Put All of Your Savings Toward a Down Payment
Know what you can comfortably afford, so that you do not end up in foreclosure as well. Rather than putting all of your money into the down payment, you can use that extra cash as part of the repair or replacement process later.
7. Bid Low on the House
The whole point of buying a foreclosed home is to save money, so when you are bidding on the house, start low. When purchasing traditional homes, low bidding can sometimes lead to offended owners. In a foreclosure, however, the other party is a bank or other financial institution.
8. Be Aware of Waiting Periods
When a home is sold as a foreclosure, significant legal paperwork needs completing. For example, the previous owners may need to relinquish all rights to the property before you sign any final sale document. It is not uncommon for parties buying the home to wait months before being able to take possession of the property.
9. Check Out the Neighborhood
The neighborhood in which the house is located is as important as its condition. Whether you are planning to live in the property yourself, rent out the property, or resell the property after you have remodeled it, location is crucial.
In some areas, neighbors are quiet and keep to themselves. Some neighborhoods have little crime and vandalism, while other locations have daily vandalism or other problems. Purchasing in such an area could leave you frustrated with continuous repairs you may have to make to the home.
10. Hold Your Ground
When a bank sells a home, it wants to recoup the mortgage amount not being collected. As long as the bank receives that dollar amount, the bank is happy. Some sellers in a foreclosure are anxious to close and would do just about anything to sell you the house.
You can be picky, and you should not have to settle for anything less than what you want.