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What You Need to Know About Buying a Foreclosed Home

What You Need to Know About Buying a Foreclosed HomeA foreclosure is when the homeowner fails to pay his or her mortgage, causing the lender to take the property back. In the US, there are over one million homes that are in some process of being foreclosed. Foreclosures give rise to great sales. This is especially beneficial in areas like San Diego where the cost of homes is high in comparison to the rest of the US. The problem with foreclosed properties is that they are also likely to have some problems. The property became foreclosed because the homeowners ran out of money, meaning they did not maintain the home. What is the secret to finding a smart foreclosed deal?

  1. Look for the real estate owned foreclosures. Instead of looking to buy a foreclosed property through an auction or amidst a quick sale, novice buyers should search real estate owned properties. These sales are similar to a typical home sale. The homes can be inspected and the buyers can have mortgages to buy the home. They are some of the cheapest foreclosed properties, often in really poor condition.
  2. Have a home inspection conducted. If you followed step number 1, you can complete this step. This is important because the majority of real estate owned properties and short sales put the property on the market without making any changes to the home. If you take a list of the problems the inspector found in the home and an estimation of how much it would cost to fix those problems to the seller, you should be able to lower the price of the home.
  3. Have your finances ready. The real estate owned properties and short sales go fast and have multiple people trying to purchase them. Those with their finances already in line are more likely to purchase the home above other offers. Before looking for properties to buy, check and fix your credit score, have a preapproved loan, and have cash ready for a down payment.
  4. Know the market. Take the time to research the foreclosure market in your area. You will want to know how much these properties are selling for, at what pace they are being sold, and how much their value is increasing over time. Hiring a buyer’s agent can help you with this step.

A foreclosure has the potential to be a great investment as the homes are cheap and ready to be made new. They are like finding a pearl in an oyster, having an unexpected quality that is waiting to be found. Take the necessary steps to be wise in the decision making process.

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