Budget Travel

August 3, 2009

Getting the Most From Your Foreclosed Homebuying Experience

By Meg Hoppe

Foreclosure SignAnyone looking to buy or lease a home these days has probably considered the pre-foreclosure and foreclosure market a lucrative place to look. If you’re a first time home buyer or aren’t that familiar with the foreclosure market it can be a rather scary endeavor to do all on your own. With the amount of foreclosures going up daily, there are countless websites devoted to tips, guides, and listings. But how do you know what sites to trust and what advice to take as credible?

I started researching foreclosure listings for a friend and found out quickly that it is one of the most muddled and confusing aspects of real estate. This rise in foreclosure properties is such new and uncharted waters anyone not a seasoned investor. You need to make sure that you’re smart about the process. It’s easy to get caught up in the sticker shock [shave anywhere between 10% and 20% off the market value of a house] of some of these places.

The first question that I had while approaching my research was where to find these homes. I looked at several websites that didn’t scream legit to me so I found it very difficult to trust their information. If you’re doing this process completely on your own or if you’re a seasoned home buyer, you can just look in the public records.

All foreclosures are listed publicly and online for people. Public records are free to access if you go down to the courthouse or deeds office to obtain the information. However, if you’re looking online, you will more often than not, get a teaser and then be required to pay a fee to see the whole notice. My suggestion, check out sites like public-record.com, realtytrac.com, and foreclosures.com, search out what you want, compile a list, and get the records yourself. Don’t rely on a third party to do your work for you.

If you decided that doing it completely alone isn’t what you want, the best hud_logo_smallplace to start might be the Department of Housing and Urban Development [HUD] website. HUD holds houses whose previous owners held mortgages insured by the federal government. HUD houses go to market about six months after foreclosure. Local governments get the first option to buy. After that, buyers who pledge to live in the house have the first opportunity to offer a bid. If the house is still on the market after a period of about 10 days, the listing is opened to investors.

After researching the HUD process, I found it to be a really safe way to acquire a foreclosed home. Because the houses are owned by the government they are often already winterized [see below] and taken care of. There could be less fixing up that needs to be done, however, it is still important to see the house for yourself and have someone with you to assess damages [see below].

Okay, so you’ve gotten the information about finding the home and now what? What do you look for in the house, how do you make sure that it’s what you want? CNN and This Old House suggested a few things such as to help you pick out a solid investment:

  1. Proper Budgeting: Set a price that you won’t go above. Make sure to keep in mind that the house will come as-is and this can mean extensive repairs.
  2. See the House for Yourself: You should never buy something as large as a house without seeing it first. Go through the house with a fine toothed comb. You’re making an investment and you want to be sure that you’re getting what you’re paying for.
  3. Note How Long the House has been Empty: The longer that the house has been empty, the worse off it could be repair-wise. Take this into account and make sure you bring a private inspector with you.
  4. Look at the Landscaping: The landscaping of a house says a lot about the quality of the house itself. For example, if there is root damage from trees, there could be sewer and pipe damage. The costs to fix something like that could be enormous and not worth it.
  5. Hire out a Private Inspector: Don’t just trust what the homeowner or government tell you. Bring in someone that you’re paying to look at the house with their professional eye. This is very important so don’t just trust your Uncle Chuck who is a pretty handy guy. Pay someone to come in, it’s worth every penny.
  6. Making Sure the House has been Winterized: Again, if the home that you’re looking at wasn’t properly prepared for the winter there could be extensive damage. Don’t run utilities until you know the state of the pipes and heating.

sold-on-house-keychainAfter you’ve done all of this:  gone through the HUD website, their FAQ, HUDclips.org, foreclosure listing sites, and gone through the property with a fine toothed comb, you are going to want to know the actual process of getting your new home. At this point, you have to be ready to jump on the home that you’ve been researching.

Whether you’re contacting the owners directly or attending a public auction, things get very competitive. Think of throwing chum in the middle of a shark pit during feeding time and you’ve gotten it about right. Often times you don’t have the time to wait or think about options before the one you want is gone. That’s why it’s so important that you do your research ahead of time. For local auctions, check out some of these websites for directions, FAQ, and locations. Note that if you attend a local auction, you will not be able to inspect the house before you buy it. For the most part, I do not recommend this.

If after doing your research you’re not sure that you’re ready to buy a home on the foreclosed market try taking a look at the rent-to-buy option. It’s essentially renting a home until you can pay off the down payment. It’s another option to getting the house of your dreams. For more information on that and pre-foreclosures and foreclosures check out these sites.

  1. 5 Tips for Buying a Foreclosed Home [AOL]
  2. Buying a Foreclosed Home: Pros and Cons
  3. Lease options: Lease Purchase Sales[About.com]
  4. Lease-to-Own Home Purchases
  5. Buying a Lease-to-Own Home
  6. irenttoown.com

*Meg Hoppe is a freelance writer and marketing professional from Chicago. Visit her other blog here and follow her on Twitter @CallMeHoppe.


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