Foreclosure refers to a legal process of buying properties when the owners fail to pay the mortgage. The lender can sell the house used as collateral for the mortgage. It serves as the opportunity for the buying public or bidding professionals to purchase the foreclosed property at a reduced rate.

Buying foreclosure has become a business for many people or agents looking for the best deals. These professionals, either a group or an individual, attend auctions to buy foreclosed properties. These professionals can also buy properties at auction through real estate agents.

No matter how much the idea of purchasing good properties at a reduced price seems excellent, it is essential not to forgo the common buying strategies. When you buy a foreclosed home, you don't get a chance to have a prior inspection. And that may mean dealing with many "out-of-the-sight" problems.

The business can be risky if you're an amateur or investing in foreclosed homes for the first time. Realistically, the business isn't for "wannabe investors." Before investing money or time in this business, a proper risk assessment is mandatory.

 You must be aware of these drawbacks if you want to involve in foreclosure at auction.

·       You might have to deal with the occupant’s eviction.

·       Occupants may give you a hard time getting evicted

·       People purchase homes "as is."

·       You may have to face a tough competition among professional bidders

·       Auctions during foreclosures are “cash only” transactions

Typically, there are two ways to purchase foreclosures;

·       Auction: if the homeowners fail to pay the mortgage payment, the lenders can repossess the property

·       Lenders: Real-estate agents or realtors help to sell the bank-owned properties.

Why You Need Expertise

Purchasing foreclosed home for residential purposes without a professional real estate agent may lead to many issues. The route has several financial risks if you buy the property without comparing the prices or checking the property's condition. Also, the fact that foreclosed homes are sold "as is" matters when investing.

Generally, there is no concession in the price or guarantee of the condition when buying foreclosed homes. However, working with an excellent real estate agent makes purchasing a foreclosed home relatively less risky. A professional realtor can check and compare the property prices and advise you whether it is worth buying.

Moreover, you must complete the home inspection to check if the property needs repairs. There is no point in buying a property at a low price if you lose savings on the repairs and rebuilds to make it liveable.

Make sure you make an offer once you have compared the prices of the homes in the neighborhood. You can make a purchasing decision after receiving the home inspector's report. Hiring a real estate agent with expertise in REO (real estate-owned properties) is better.

An REO agent helps buyers find the properties that are priced right and are not too high than those in the neighborhood. You can successfully navigate the foreclosure process by seeking the assistance of an experienced REO agent.

How to find an expert REO agent?

You can find an REO expert by;

·       Asking for a referral from others who bought home

·       Checking online (reliable forums to find REO agents)

·       Searching for REO properties that are listed for sale online

·       Looking for closed REO

·       Talking to potential representatives to get relevant and specific information

You may also opt for banked-owned properties as they can provide substantial savings like properties in the auction. You also get an added protection of professional advice and inspection of the agent.

Keep in mind that banks often list these properties at a higher price than the market price to recover more money. If you find the property at a reduced price, do proper research.

Most REO properties require repairs, so the best way to make an offer is after the home inspection. The discovery of necessary repairs to the roof or drains will help you bargain the price. However, if there is no major repair, buying an REO property with minor, aesthetic fixes such as flooring, paint, or carpeting will not affect the price much.

Keeping properties on the books before listing them often costs the banks. That is why they sell them to various investment groups. The properties can turn into a liability if the city authority fines them for disrepair or code violations.

Closing a bank-owned property could take longer if the asset manager is dealing with the backlog of foreclosed properties. This may interfere with your move-in plans unless you have no time constraints.

Thus, investing in a foreclosed property is only beneficial if you make an informed decision. You must prepare yourself before moving forward with a foreclosed property as it may cause irreparable financial damage. Work with a real estate agent if you're looking for an excellent bargain to buy an REO property.