Making the Best from the Worst: Purchasing Foreclosure Property

Property is a great investment, even during troubled economic times. The current recession has created a wave of foreclosures, resulting in a glut of houses on the market at rock-bottom prices, as lenders try to sell off these homes in an attempt to recoup their original investment. For those who have the capital to invest, it is a buyer’s market. However, foreclosure properties often have hidden issues, and buying them is done in a certain way, so a wise investor should make sure they have done their homework and know the procedures.

Check the listings. See your local newspapers and bulletin boards for announcements of foreclosure sales. Look online for sites with databases of government and private foreclosure auctions. Drive around the area and look for foreclosure sale notices and signs, which have to be posted publicly.

Research. Make sure the title is clear before putting down any money. A title attorney can do the necessary research. If there are any entitlements or liens, find out if they will be dealt with during the sale. If the seller is one of the major lenders such as Wells Fargo, GMAC or Bank of America, take extra care that all legal processes were done correctly prior to the foreclosure, as many of the foreclosures done by these banks and others have been declared invalid due to the banks’ unethical procedures.

Take a look. Many foreclosure homes have been vacant for some time, leaving them affected by the elements: floods, fires, leaks, wind–all of these cause damage. Due to the sheer volume of the number of foreclosures most lenders have to oversee, their resources are stretched thin, so a good number of these homes have not been maintained properly. There have also been many cases of vandalism or “squatting.” If you determine to buy a property which is a “fixer-upper” make sure you have the time, money and patience to bring the home up to code and worth the initial investment. You might want to buy title insurance, as that isn’t included in a foreclosure sale. Additionally, remember than any property taxes due on the home are normally the new owner’s responsibility.

Make your bid. Foreclosure auctions are normally held either on the property site or at the local courthouse, depending on what kind of sale it is (judicial or private). Come prepared to put a deposit down, and to pay the full balance within 24 hours, although some states require the full balance of the sale at the time of purchase. Also, check your local regulations, as they sometimes require a cash sale.

Take possession. If the home is still occupied (legally the previous owner can remain until the property is sold or they are evicted), you will need to begin proceedings. Consult an attorney to verify what needs to be done. Usually people want to avoid the embarrassment and record of an eviction, but when it is necessary the sheriff will issue a notice to quit to the occupants, giving them a set time to leave. Once the occupants have left, change all locks and begin making the property into the investment you want it to be.

Check the listings. See your local newspapers and bulletin boards for announcements of foreclosure sales. Look online for sites with databases of government and private foreclosure auctions. Drive around the area and look for foreclosure sale notices and signs, which have to be posted publicly.