Buying a Foreclosure Home

By Lee Cameron Published 08/5/2011 | Real Estate

With the market flooded with foreclosure homes, many see distressed properties as the golden ticket of real estate. There are certainly good deals to be found but buying a bank-owned home can be a complicated and time-consuming prospect. Here are some tips to help you on your way.

1. Matching the Criteria - Keep in mind that banks will be wary of selling their foreclosed property to someone with weak credit. No bank wants to be put in the same position in another year so they will look for buyers who have outstanding credit, a hefty amount of cash for a down payment, or both.

2. Patience - It can take a great deal of time to find the right property in the foreclosure market, and once you've found the right home, it can take even longer to deal with the bank and the paperwork. If you're in a hurry, buying a distressed property probably isn't for you.

3. Be Specific - The housing market is full of options for a buyer right now, and the foreclosure market in particular is overflowing. To save on wasted time and energy, try to narrow your search before you start looking for a home. Sticking closely to a single neighborhood or small area of town can help things considerably. Additionally, you should try to look in a neighborhood that has relatively few foreclosures. These areas will be more likely to rebound quickly once the market improves.

4. Do Your Homework - Knowing as much as you can about the market and the properties that you are interested in will always help the process. Look at property values and employment trends to determine which neighborhoods may see their home values rebound quickly. A good Realtor would be a big help with this kind of research.

5. Learn About the Seller - Along with researching local areas, you should also research the bank that you are planning to buy the property from. Try to talk to the bank directly and find out what they're looking to get out of selling the property. If they tell you that the monthly costs of upkeep are too high, they might respond better to an offer to buy quickly. If their biggest concern is the minimize losses, you might benefit from putting in an offer close to market price. Find out what the bank needs and you'll have an advantage. 

6. Get a Good Realtor - Even if you do all of the research and legwork yourself, sometimes a bank will not be willing to work with a buyer directly. In this case, you'll have to find yourself a good real estate agent. Luckily, a good Realtor can also help with your research, dealing with the lender and handling all the complicated paperwork. Research local agents like you would anything else. It's important to find someone who has a great deal of knowledge and experience in the local area. You also want to find someone who is patient, personable and diplomatic. Buying a distressed property can be very time-consuming and you don't want an agent who will give up halfway through.

There are plenty of great deals to be had if you want to buy a distressed property. Just follow this advice and the process will be much smoother.