Buying Foreclosure Properties: Five Tips from the Pros

Search Foreclosures FREE For 7-Days!
Free access for 7 days, try it out! No strings, no contracts, no hassles and you can cancel at any time. Hurry! Foreclosures sell fast. Visit RealtyTrac.com. With virtually every Bank, Government and Institutional property you'll find your next home waiting for you

RealtyTrac, Inc., the leading online marketplace for foreclosure properties, provides all the resources that home seekers, investors and realtors need to locate, evaluate and buy properties at below market value.

Founded in 1996, RealtyTrac sets a new standard for online real estate services by offering the largest database of pre-foreclosure and foreclosure properties, with more than 500,000 properties across the country, comprehensive property data, productivity tools and extensive professional resources.

RealtyTrac hosts close to 2 million unique visitors monthly, and is the exclusive foreclosure data provider to AOL, Home Gain, MSN House and Home, The Wall Street Journal Real Estate Journal and Yahoo! Real Estate.

Buying Foreclosure Properties Below Market Value: Five Tips from the Pros

House hunting can be a very daunting experience, especially in today’s real estate market. Both investors and home buyers have been priced out of the market by escalating costs, and good real estate deals are increasingly difficult to find.

But there are bargains out there, for people who know where to look.

"For people willing to do some homework, the foreclosure market offers some of the best opportunities in real estate today," explains James J. Saccacio, chief executive officer at RealtyTrac, the leading online foreclosure marketplace.

Web-based services such as RealtyTrac give consumers access to foreclosure and pre-foreclosure information that was previously available only to professional real estate brokers and investors.

Today, homebuyers can use these services to assist them identify and research potential home purchases, as well as the tools and professional resources they need to help them close the deal.

With interest rates ticking up and ARMs adjusting upward, experts predict an increase in the number of foreclosure properties on the market. RealtyTrac, which provides all the foreclosure data for both MSN House and Home and Yahoo! Real Estate, has already compiled a list of over 550,000 foreclosure properties across the country.

"Foreclosure properties can be a terrific investment, or give home buyers a much more affordable option than traditional properties," notes Saccacio. "But they’re not a way to get rich quick, and a foreclosure purchase needs to be approached in an educated, intelligent manner."

Saccacio offers five tips to help you close a deal on a foreclosure property:

Buying Foreclosure Properties Tip #1:
Learn about the different types of foreclosure properties, and the foreclosure process.

There are three basic types of foreclosure properties, representing different stages in the foreclosure process: notice-of-default (NOD) and notice of trustee sale (NTS), which are both pre-foreclosure properties; and real-estate-owned (REO), a foreclosure property which has been re-purchased by the bank.

For most consumers, buying a pre-foreclosure property from a private homeowner is the best option. It’s important that both the buyer and the seller see the situation as a win-win situation, in order to ensure a smooth process.

In this case, the seller is able to get out from under a mortgage without destroying their credit rating, the lender is saved the time and expense of foreclosing on the property, and the buyer gets a below-market price on a home.

Foreclosure auction sales are typically the domain of the professional investor. These properties are formally in default, and sold to the highest bidder at an auction.

Buyers are required to be physically present at the auction, and must pay 100% of the sale price in cash, on the spot. Though foreclosure auctions can offer significant savings, they are not for the feint of heart or the uninformed.

Unless the buyer is already familiar with a particular property, there is usually little time to examine it. And the buyer will be competing against professional investors — and sometimes even the lender — at the auction.

Once the lender officially reclaims a home, it becomes a real-estate-owned property (REO). While REO properties typically offer more time for evaluation and a more standard bank-managed transaction, their prices are usually very close to full retail market value.

Buying Foreclosure Properties CHART: Stages of the foreclosure process

Buying Foreclosure Properties Tip #2:
Secure financing early

It’s important for a buyer to be pre-qualified before engaging in discussions with a seller. This ensures that the buyer is in a financial position to purchase the property, and is in the strongest possible position to negotiate.

It’s best to work with a lender who understands the foreclosure process, and can guide the buyer through certain steps, such as ensuring that a property is FHA-compliant.

Another reason to consider pre-qualification is that not all lenders finance for buying foreclosure properties. Having approved financing in-hand makes negotiations with both the seller and the lender easier, and may even make it possible for the buyer to simply cure the default and take over the existing loan to reduce loan processing fees.

Buying Foreclosure Properties Tip #3:
Engage a real estate agent as a "buyer’s representative"

Most people hire a real estate agent to sell their home. These "seller’s representatives" are charged with making the sale and negotiating the best deal for their clients.

"Buyer’s representatives or Buyers Agents" have the home buyer’s interests at heart, and are charged with finding the right property and negotiating the best price for their clients.

Picking the right real estate agent will make a buyer’s life much easier. There are agents who specialize in the foreclosure market, with specific experience in REO properties. Look for an agent with foreclosure transaction experience, as well as knowledge of local, regional and state laws.

But it’s also important to consider the agent’s knowledge of the area; their ability to close a deal; and their access to other professionals (attorneys, lenders, mortgage and title professionals) to ensure that the buyer is in good hands.

Buying Foreclosure Properties Tip #4:
Do Your Homework

Stocks offer higher potential returns for investors than traditional savings programs, but are also riskier.

Similarly, purchasing foreclosure properties is somewhat more risky than buying traditional real estate properties, but offer much higher potential savings. With the right examination and due diligence, buyers can significantly reduce the risks. It makes sense to give any property under consideration a thorough examination. Here are eight steps for doing a professional-level exam.

Buying Foreclosure Properties Tip #5:
Make a realistic offer
Despite what you may see on late-night cable TV, buying foreclosure properties isn’t a sure fire "get rich quick" formula.

Lenders aren’t likely to give properties away, particularly in a real estate market where prices continue to rise. And homeowners in financial distress may be difficult to deal with, particularly early in the foreclosure process. The keys to a buying foreclosure properties successfully are diligence and patience.

As a rule of thumb, the best savings can be made at the pre-foreclosure stage, where home owners can avoid a foreclosure and lenders can save the time and cost involved in going through the process.

Another critical point in the process is immediately prior to the auction date, when all parties might be most open to a last-minute solution. It’s not unusual to save from 10-30% of the market value when buying foreclosure properties, and certain properties offer savings of 50% or even more.

An educated buyer...one who knows how much is owed on the property and what its market value is, can usually come up with a realistic offer; one that offers significant savings, while meeting the requirements of the lender.

Now go out and familiarize yourself with the resources and tools available to take advantage of the opportunities offered by this formerly hidden real estate market.

With the experts pointing toward significant growth in available foreclosure properties, there’s never been a better time to line up your resources and get informed to start buying foreclosure properties.

  Assess Before Buying Foreclosure Properties From The Banks

  The Real Estate Auction ... Going, Going, Gone!

  Create Wealth: Why You Should Rent To Live And Buy To Invest!