A foreclosed home can offer you a bargain basement price as a homebuyer, but what about the pitfalls that comes along with buying these types of homes? There are risks associated with buying a home in foreclosure and when you buy the home at an auction, the risks tend to increase. Learn what you are getting into before you to take the leap and how to recognize red flags, so you can avoid common mistakes.
Research County and State Rules
Each county and state handles its foreclosure auctions differently. Some counties still hold live auctions on the steps of the county courthouse, while others have moved their auction process online. Some of the information you need to research before bidding on a foreclosed home at an auction includes:
- Bidding process;
- Amount of deposit you need to bring to the auction;
- The auction location;
- Whether the current homeowners have the right to try to get their property back after the auction sale.
The best way to learn the process for your area is from your county tax collector (the office that typically manages these auctions) or a real estate agent in your area.
Access Free Information
You’ll see companies on the Internet and TV advertising lists of foreclosure homes for purchase. Save your money! All of this information is available for free. Your local newspaper likely lists home foreclosure auctions. And when a foreclosure is going up for auction, the county usually lists this information online, including address, current mortgage balance, year built, square footage and more.
Conduct a Drive-By
Once you have addresses for some of the auction properties in which you’re interested, visit the properties. Unfortunately, you won’t be able to get inside a foreclosed home, but you can view the house’s exterior condition. If a home happens to be vacant, you may be able to peek in the windows. If a home is not vacant, be careful. Some homeowners who are losing their homes to foreclosure can be angry and even hostile, so proceed with caution.
Discover the Home Value
One of the big advantages to buying a foreclosure home at auction is getting a good deal. To know if you are getting a good deal, you have to know the market value of the home, as well as the mortgage balance, if any. If there is a mortgage on the home, then this is the home’s value, so you should bid an amount equal to or less than this amount.
You also have the option to hire a real estate agent to provide you with a broker price opinion (BPO). The real estate agent will conduct research and find comparables (comps) homes in the area to give you an idea of the home value.
It’s important to understand that there is a process to foreclosure auctions. While you certainly can get a good deal on a home, even a home of your dreams, you need to know what you are doing to avoid making mistakes that may cost you more than you think.
For more home buying tips and tools, including home loan recommendations and a credit improvement program that will help you qualify for the lowest mortgage rates, visit Quizzle.com.
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