Use Caution with Foreclosures

December 1, 2009 | 155 Comments

I ran across this article in USAA Magazine, Winter 2009 and thought it was very helpful if you’re considering buying a foreclosed property. Impulsive or uneducated buyers can find themselves holding the deed to a bottomless money pit if they’re not careful. Here are some tips that could help you out in this situation:

  • Do your homework-search reputable online databases for foreclosures. When considering unfamiliar areas, research neighborhoods, school and market prices.
  • Don’t buy property at auction unless you are comfortable with unknown risks. Actioned properties may be in poor, unliveable condition and/or may have liens against them that will cause legal trouble down the road. Buying bank-held foreclosures is safer.
  • Do drive a hard bargain. A foreclosed property should be at least 20% lower in price than similar homes.
  • Don’t make an offer before having the inspection done. Look for water or insect damage and any structural problems. It’s a good idea to hire a professional for electrical, plumbing and HVAC systems.
  • Do work with a real estate agent. Real estate agents can help negotiate you a lower price on the home and can walk you through all the necessary steps to home ownership.
  • Do get financing before you shop. It’s always a good idea to meet with your bank to see how much they will owe you so that you can decide which price range you can afford. Some offers today require a letter of pre-qualification before the offer will be considered.

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