It's harsh but true: You can benefit from others' misfortune. The rise in foreclosures means that those in the market to buy a home can find great deals on houses that have been reclaimed by lenders. They are often sold for prices well under their market value because their owners are eager to unload them.
The cheap prices do come with potential downsides: Some homes have liens against them or mortgages associated with them, which can be inherited by their new owners. It can also be hard or impossible to inspect such homes in advance of their sale, which means there's no time to check if the basement is flooded or if the air conditioning still works.
But if you're willing to brave the risks, then your first challenge is locating the bargains. Here are five ways to find the best deals.
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1) Search bank websites
Banks often list their foreclosed properties for sale on-line. At Bank of America, for example, about 800 residential listings are posted, including 156 in California. Prices, photos, and home descriptions are listed along with agents' contact information. Willie Williams, a real estate agent in Inkster, Mich., says that it's a useful resource but warns that listings are often limited. He recommends also checking the on-line listings of Fannie Mae and Freddie Mac, which purchase mortgages from banks.
2) Look up government-owned listings.
The Department of Housing and Urban Development lists the foreclosed homes that it owns on its website as well as through local real estate agents. Once you find a home you're interested in, you can make an offer through the agent representing the property. The department warns that the homes are sold "as is" and that after the sale is made, it is not responsible for any repairs or problems.
3) Visit your county's offices.
Foreclosure information is filed with county offices, some of which post it on-line. In Boulder County, Colo., for example, current foreclosure listings, as well as weekly sales, are published on the county website, where users can search by ZIP code or street address. Sheryl Del Rosario, a deputy public trustee in the office, says interested buyers can search from home or come into the office to use the public computers. They can then bid on available properties every Wednesday morning.
4) Pay for a foreclosure listing service.
Some companies, such as RealtyTrac, offer comprehensive foreclosure listings for a fee. At RealtyTrac, $49.95 a month gets users access to around a million listings that cover about 75 percent of the nation's counties. They include homes already in foreclosure as well as those approaching it. (Website visitors can search a simplified version of the database free of charge.) Users can make offers on-line for many of the properties, which aren't binding but get the process started, says spokesman Daren Blomquist. Users usually work with either the agent or owner listed in order to complete the purchase. The database also provides estimates of the property value based on comparable sales in the area, which Blomquist says helps buyers determine whether they are getting a good deal.
5) Work with a real estate agent.
Real estate agents often know about local properties that are nearing foreclosure because they network with other agents and are familiar with the local market, frequently working directly with banks and other lenders. Donna Dickson, an agent with Burgdorff Realtors in Maplewood, N.J., says that while online listings often include properties that are already under contract with new owners, real estate agents can help buyers find deals before it's too late. She suggests developing a relationship with an agent who will quickly let you know about new foreclosed properties.