Steps of Foreclosure

Purchasing Foreclosed Homes

A foreclosure means that a homeowner has been unable to make the mortgage payments and the lender has taken the property back. Purchasing foreclosed homes from the lender is less risky than attending a foreclosure auction and making the purchase there. In most cases you can't view or inspect the property prior to the auction, where once the lender has taken the house back it is typically listed with a local real estate agent and therefore you can view and inspect the property prior to purchasing foreclosed homes.

An advantage to purchasing foreclosed homes is that the lender wants to recover as much of its investment as quickly as possible. This means that the property could be listed at a significant discount, sometimes 30 percent or more. Find a real estate agent who is experienced in foreclosures. Some lenders will not accept an offer from an unrepresented buyer.

If you are interested in purchasing foreclosed homes search the real estate magazines, newsletters, newspapers and the Internet. You can also call lenders and ask them to provide you with a list of real estate owned (REO) properties. Government agencies such as Fannie Mae (fanniemae.com) and the Department of Housing and Urban Development (hud.gov) also advertise foreclosed homes for sale. You can also check local public records because lenders deciding to foreclose must file a notice of default in the local county clerk's office.

Before purchasing foreclosed homes, inspect them as closely as possible. Some foreclosures are in good shape where others are behind in routine maintenance. Work with a real estate agent to check comparable home prices and make sure the asking price for a foreclosed home is a bargain.