What to Know If Buying a Foreclosed Property

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In today’s economy more and more properties are going on the market as foreclosures; which sounds good on the surface, but sometimes if things seem to be too good to be true they are.  Foreclosures may seem like the opportunity of a lifetime and some just may be; however, there are several things buyers need to take into account and be aware of prior to buying a foreclosed property. 

First and foremost, take the time to do a title search on the property, or if you do not know how then spend the money to have a title company do one for you.  If you do not take this essential step, you could end up buying a home for $150,000.00 but paying $300,000.00 because it had a second mortgage and several liens waiting in line to be paid off and in order to take ownership of the home guess who foots that bill?  You. For this reason, you will not be able to get title insurance to provide protection against challenges to your ownership of the property, which is why the title search is so important. 

Secondly, keep in mind that even if the property truly is a great deal and everything is in order, you need to research the property taxes.  Just because you can suddenly afford that charming beach house, does not necessarily mean you can afford to live in it.  It is important to remember that just because home prices and the real estate market have taken a serious dive, property taxes have not.  (Obviously, if your state does not have property taxes this warning would not apply.)  Another obstacle some face when purchasing foreclosed properties is that the money needs to be liquidly available to purchase the home, and that sale needs to be paid in full in order for it to “close.”  Most lenders will not offer a loan on these types of properties, because it is often difficult for an inspector/appraiser to do their job(s) prior to the sale.

Finally, beware that foreclosures are sold “as is” and that you need to have a “cushion” of cash available to repair any unexpected issues.

Ultimately, if you are a savvy and prepared buyer, a foreclosure can be the deal of a lifetime.  Be sure to educate your self, not only about the property, but also about the process.