Things Not To Do When Buying a Foreclosure

By
Real Estate Agent with Remax Alliance Group

Acquiring foreclosed properties can be done several ways, but it is auctions which present the best deals. In fact, home buyers in the US can successfully bid for a property priced 40 percent below prevailing market levels. However, to be successful in the bidding, there are many steps that a bidder cannot do without.  

Do not go into a foreclosure auction without a thorough understanding of the bidding regulations. Auction rules vary from state to state in much the same way that their venues differ. Some auctions are held in a county clerk’s office, at the front yard of the foreclosed property, or even at a courthouse’s footsteps.

There may even be a policy that bidders cannot visit the property for auction. Certainly, this is a great disadvantage to home buyers. They cannot estimate accurately the additional costs that will most probably go into the repair or reconstruction of the foreclosed home. Having such an estimate is a crucial input to an auction bid that is neither too high nor too low.

In an auction, it is also highly likely that some real estate companies or brokers will be participating. This is not a situation ideal for ordinary home buyers. They will be in a bidding competition against institutions with the skill and expertise in auctions.

For those buyers eying foreclosure purchase in order to have a home or house for rent, the risks and disadvantages of participating in an auction are therefore best avoided. A better alternative are the REOs or real-estate-owned properties. REOs are mostly homes held by mortgage companies or lending banks following an unsuccessful foreclosure auction.

But do not attempt to make an offer for a foreclosed home without fund planning on its acquisition. In this exercise, several issues cannot be left hanging in mid-air. Firmly establish how the acquisition of the foreclosed home will be financed. Cash is certainly king, and it will of great advantage to offer s substantial equity contribution or down payment for the foreclosure purchase.

By all means, don’t leave cost of remodeling or repair in the funds planning for the acquisition of a foreclosed home. This would be especially true if the property being considered is in an “as is” condition that would call for some extensive rebuilding work. If no sufficient funds are available for such an undertaking, shy away from such a foreclosed property.  
 
Most important and basic, do not venture into acquiring a foreclosed home without first analyzing its community standards. In my local area, the purchase of a foreclosure located in Bradenton or Sarasota Florida affords the possibility of being a part of a friendly neighborhood with high quality living standards close to some of the best beaches in the country—plus points that cannot be left out when buying a foreclosure as these will greatly influence the re-sale value.  

My Bradenton foreclosures website features all REO properties in Manatee, Sarasota, and Charlotte County. Every listing you find on that site is a foreclosure. My main website features Bradenton Real Estate. There you will find all active listings from the MLS for Manatee, Sarasota, and Charlotte County, Florida.

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Jerry Piotrowicz

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