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Tips on How to Buy a Foreclosure
By Cassandra_BHM | May 27, 2010
If you are in the market for a new home and are looking for a way to get in before the interest rates increase, there are a few non-conventional options. If you’re considering purchasing a foreclosure for instance, there are three variables to be aware of. First, a foreclosure can consist of a pre-foreclosure where the homes are in the foreclosure process but they have yet to be sent to auction. It can also be in the auction stage, where the home will yield the lowest price, and then there is the repossession stage where the house has gone through the auction stage but did not sell.
If you take a closer look at the pre-foreclosure option, you will find that it has a few drawbacks. When a home hits this stage, it’s generally because the homeowners owe more on the house than it’s worth and they simply cannot afford to make the payments. When you are looking to buy a pre-foreclosure, as a potential buyer, you must negotiate a deal with the lender as well as the homeowner. That will make buying at this stage of the foreclosure slow and complicated. An advantage, however, is that this is the only method of foreclosure buying that allows you a home inspection prior to purchase.
The auction option is perhaps the easiest way to buy as it is officially a bank-owned property. Even though these sales bring in the lowest prices, they are riddled with difficulties. There is no chance of a home inspection prior to buying, often leaving new buyers with a long list of home repairs. This option is often best left to professionals who are contractors and investors who have experience repairing these types of properties.
Buying a house that has been repossessed also has some benefits. First of all, the bank selling the home may extend the preferential financing terms to the new buyers and may have even made some repairs to the home prior to it being sold. If not, you as a potential buyer may have the opportunity to have a home inspection done yourself before closing. It is best to keep in mind, however, that in most cases, the homes are sold ‘as is’ which means the bank won’t pay for any cosmetic repairs but will often pay for any health and safety issues, which makes getting a home inspection even more critical. Homebuyers may not get the best bargain during this stage, but the property does come with a clear title.
The best way to get into your dream home is always to do your research and know what you are getting yourself into. Jumping on the first house you fall in love with without properly investigating is almost always a mistake.
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