Purchasing a foreclosed home can be advantageous — sellers are highly motivated, and properties for sale are typically listed below market value. However, buying a house that’s foreclosed without prior due diligence can result in decades of unforeseen issues and costs. Here’s what to keep in mind before you start scouring foreclosed real estate listings. 

How to Invest in Foreclosures Wisely

1. Inspect Before Buying

Foreclosures are sold as-is, so you should inspect the home for sale thoroughly before purchasing. Knowing what’s required to fix the home will result in accurate repair costs estimates. If the home has been unoccupied for a long time, or if there is significant damage, costs can quickly escalate.

Check the landscaping for signs of wear or neglect, and bring in a professional to help you properly evaluate the home. Learn about the surrounding neighborhood by visiting during different times of the day and different days of the week.

2. Know Fair Market Value

There generally is not much room left for negotiating the price on foreclosed homes, but educating yourself on the prices of similar local listings is still a powerful tool. This will allow you to bid competitively and see if the home is a good deal based upon location and condition.

3. Understand Foreclosure Financing

Technically, foreclosed homes are real estate-owned (REO), meaning that the bank owns the property, but the selling bank will not simultaneously finance the property. This means you’ll need to secure your own financing before making an offer. Finding a reputable lender and obtaining a pre-approval letter before financing will significantly increase your chances of securing financing for the purchase.

4. Consider a HUD

HUD homes are residential properties acquired by the US Department of Housing and Urban Development as a result of a foreclosure on a Federal Housing Administration (FHA) loan. Since they are government-owned, HUD’s tend to be in better condition than private foreclosures. Some properties in designated revitalization areas are available at reduced rates for certain parties — including teachers, firefighters, and nonprofits. 

Since 1984, RE/MAX First Choice-JoAnn Meier has been serving the Waterloo, IL, area. This qualified team is dedicated to helping clients find their dream homes. Visit their website to learn more about their work, and call (618) 939-6003 to experience their award-winning real estate services.