Foreclosures are more common these days, finding a foreclosed property to buy has become a lot easier than it was during the housing bubble. When home prices were increasing in the double digits annually and anyone could qualify for a mortgage , the supply of foreclosed homes was low. Now the the housing bust has arrived in full force, the supply of California foreclosures, Florida foreclosures and Texas foreclosures has gone through the roof. Foreclosures in other states are not that plentiful as those three states but finding one is still easy in any state.
There are several ways to find a foreclosed property, you can go to an auction, buy directly from a bank, from government entities such as Fannie Mae and Freddie Mac. The Department of Housing and Urban Development has a list of government entities that sell foreclosed homes.
Buying a foreclosure at auction can be risky because you usually have a limited amount of time you can inspect the property, sometimes you can’t inspect it at all. You have to come up with the money to purchase the foreclosure pretty quickly. You also have to bid for the property, which can be exciting but you don’t want to get caught up in the excitement and overpay for the property. Buying a foreclosed property directly from a bank is the best option.
Since foreclosures are so common these days banks are also listing foreclosures on the Realtor Multiple Listing Service (MLS), making the process even easier than contacting individual banks.
Some real estate brokers specialize in foreclosed properties. When you search the MLS for foreclosed homes, look for “Real Estate Owned (REO)”, these are properties owned by banks. Buying REO properties will take longer than buying a home from an individual, so be prepared for a long drawn out process. If you have the time, the savings on a foreclosed home directly from a bank can be substantial.
It’s not uncommon to save 30% to 50% of market price since banks have so many properties on their books they want to unload. The condition of foreclosed properties are a lot better than they have been in the past so finding a foreclosed home in livable condition isn’t hard. If you are buying a foreclosure it’s good to budget for unexpected expenses so factor in having some cash on hand affer your home purchase.