Buying foreclosures the safe way

Buying foreclosures is not recommended for first time home buyers. Here it is why.

When buying a foreclosed as a bargain look for the reason or reasons of the low price:

• Motivated seller by loss of income or family problems:

• Poor house physical condition;

• Problems in the neighborhood.

You want a house from a motivated seller only. Assume you found what you want. From purchase timing point of view there are three important moments:

1. Negotiating directly with sellers in foreclosure and purchase these homes before the foreclosure proceedings are final. A distressed owner may sell bellow the mortgage balance owed, since a foreclosure will destroy his or her ability to to get another mortgage loan. This is the time to "help" the home owners avoid further embarrassment.

   The seller gets some money to move out and signs a "Quit claim Deed" and the purchaser pays all the debts. At that point you may discover more liens against property and the bargain is now an expensive purchase. This is not for me and I cannot say more about it. To help somebody in foreclosure process see "Tip to Stop Foreclosure" article.

2. Buying a foreclosed property at Auction Sale. Sometime buyers are not allowed to inspect the house before making an offer.

   The problem with buying a house sight unseen is you can not calculate how much it will cost to improve the structure or bring it up to habitable standards. Nor do you know if the occupant will retaliate and destroy the interior. The appliances kitchen cabinets, toilets even the electrical installation may disappear.

   After auction every state provide for a redemption period and seller has the right to pay the default, foreclosure costs, back interest and missed principal payments, to regain control of the property.

   On top of that, you may need to evict the tenant or owner from the premises after you receive title, and the eviction process can be costly.

3. Purchase from the Lender. The lender may be willing to wave some closing costs, may offer a smaller interest rate or a down payment.

   For novice investor, buying from the lender is the safest way to buy. Bank-owned properties offer the safest deal for inexperienced foreclosure buyers: there is no risk, there are no taxes, no liens, no tenants to evict.

   Because the bank has done an appraisal, the buyer might save an appraisal fee. The lender deals include the title insurance, which is much of the risk that accompanies buying homes earlier in the foreclosure process.

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