Buying a Foreclosed Home

Buying a foreclosed home is a little different from standard home buying. My wife and I bought a foreclosure for our first home and we can tell you from personal experience there are some serious advantages and disadvantages to going the foreclosure route.

Advantages:

1. The house will be generally listed for less than what would be expected in the market.
2. You do not have to deal with individual sellers, you're dealing with the bank that owns the property. Things are more straightforward.
3. If you are handy and can take care of most of the repairs yourself, you can get a lot of house for a little money.

Disadvantages:

1. You're dealing with the bank instead of the property. This makes haggling prices a bit more difficult.
2. Foreclosures are generally in poor shape compared to private home sales. People get upset when the bank takes their house back and take out their anger on their house before they leave.
3. The bank doesn't always take great care of the house while they own it. Our house was improperly winterized by the bank and as a result, every pipe under the house had blown out. There was also a fine layer of mold over every surface.
4. There really isn't anyone to tell you anything about the house. We got all our information from the home inspection and what the Realtor knew about the property.
5. The bank will generally not make any repairs to the home as a condition of sale. The home is sold as-is. The best you can do is try to get them to drop the price.

If you decide a foreclosure is the way you want to go, the process of buying a foreclosed home is fairly simple.

1. Contact a local Realtor and tell them you are looking specifically for foreclosed homes.
2. Inspect the home inside and out! While banks balk at you doing so, there is nothing preventing you from having a home inspection done before making a bid. The more you know about the house the better.
3. Make a bid that is based on the asking price and what you find out about the property during the inspection.
4. Have a loan ready to go for the original asking price of the house. Odds are you're going to get the house for less and can change how much you're going to borrow, but it's helpful if the bank knows going in that you've got the credit to buy the house. They already got burned by the last owner and would rather not have it happen again.
5. The bank is generally selling the house for far less than it wants to. When making a bid, be careful to not get too greedy. We gave a couple of really lowball bids and the bank basically told us to go pound sand. Our Realtor had to sweet talk the bank into talking to us again.
6. Keep the Realtor involved! Our guy was outstanding and fought with the bank to get us what we wanted.
7. Be ready to close on the house quickly. The bank wants this property off their hands right away. Have earnest money ready to go.

That's really all there is to it. The big thing we noticed about buying a foreclosure was that there was virtually no human contact involved. The Realtor acted as middle man and did all the communication with the bank. If I can suggest anything, it's that you get a good Realtor. Our guy made the whole process reasonably painless!