It’s a tantalizing idea: Snap up a foreclosed home at a bargain price. Prospective foreclosure buyers have had plenty of opportunities to buy in the housing crash. Between 2010 and 2011 alone, banks foreclosed on nearly 2 million homes, according to research firm CoreLogic. But buyers need to beware. Some foreclosures are in such poor condition that repair costs can ruin a great deal. If you want to see a foreclosure before you buy it, you have a few resources to tap into.
Your best bet for seeing foreclosure homes firsthand is to find a real estate agent who specializes in selling bank-owned properties. Agents network with other agents and lenders to learn what's available in the market. Agents also weed out foreclosures under contract, while other sources such as government websites include listings with sales pending. Cultivate a relationship with an agent who can tell you about foreclosures just coming on the market. To find an agent who focuses on foreclosures, start with your bank. Most banks contract with a handful of agents to sell bank-owned homes. Also, local Realtors associations have websites that list area homes for sale. Look at listings to find agents who sell foreclosed homes. It's important to work with an agent experienced in foreclosures because buying a bank-owned home requires different paperwork and documentation than buying a conventional property. Agents savvy to the process can guide you through it and help determine if you're getting the best price.
If you live in a larger city, you may be able to join a bus tour of foreclosure listings. The tours last several hours and stop at half a dozen or more homes. Participants get to go inside homes to see their condition. Tour operators range from local adult-education centers to sales agents. Tour fees as of June 2012 started at $10 and ranged up to $100 or more. To find a foreclosure bus tour in your city, call your local Realtors association.
Many banks list foreclosed properties on their websites. To see bank listings, go to a lender's website and find its real estate or mortgage center. Click on the option to search for bank-owned or real estate-owned properties. Most sites let home seekers search by city, ZIP code, price or even desired number of bedrooms and bathrooms. Listings also include year built and the property's sales agent. Most listings come with photos of both exteriors and interiors. Looking at photos doesn't provide the level of detail that touring a home does, because listing agents may not include photos of problem areas or damage. But it can give you an idea of whether a home has a floor plan, price or location that make it worth looking at in person.
Federal agencies that back home loans list foreclosed properties for sale on their websites. The U.S. Department of Housing and Urban Development features listings with inside and outside shots, as well as an inspection report. It also includes details on who's eligible to bid on a property. For example, for the first 45 days they're listed, most HUD homes aren't available to investors who plan to rent out the property. The listing tells you if that period has expired. HUD's website also includes listings from the Department of Veterans Affairs and the Federal Deposit Insurance Corp., and lets prospective buyers bid on properties online. Fannie Mae's HomePath.com website allows buyers to search for and bid on distressed homes or foreclosures by ZIP code and price. Freddie Mac's HomeSteps.com website lists and accepts bids on available homes, too. Your tour of or offer on a home listed through a federal website must go through the agent representing the property.
Banks file foreclosure information with counties and cities, and some municipalities put that information online. Visit your county website to see if it has a section on bank-owned properties. If you're interested in whether a specific listing is in foreclosure, your county assessor may have details. Go to your assessor's website and type the property address or parcel number in the search box. Property records usually include owner names. If the owner is a bank, the property is in foreclosure. Call or email the bank to ask whether the property is available, and if you can have a look inside.
If you're willing to shell out a monthly fee of around $50 as of 2012, several private foreclosure-service companies mail customers weekly or monthly lists with photos of available bank-owned properties. Listings include foreclosures and properties nearing foreclosure, with details such as estimated values and home specs. Buyers can make online offers for listings, but must work with the listing agent or property owner to close the deal. Find a foreclosure-service company that lets you try its website for free before you commit to a monthly charge.
Remember while you're searching that foreclosures come as-is. You can't demand repairs on a neglected or damaged home after you close the deal. Common problems inside foreclosed homes include poor maintenance, black mold from water leaks, damage from wild animals, mounds of trash, missing appliances or fixtures, and vandalism from angry prior homeowners, squatters or thieves who want to resell copper or other home components. To protect yourself, order a home inspection to determine whether you'll pay so much in repairs that the purchase no longer makes financial sense. And don't expect to bargain down the bank's asking price on a home in disrepair: Banks set prices based on the sales price of comparable nearby homes in similar condition.
- U.S. News & World Report: 5 Ways to Find Deals on Foreclosed Homes
- Bankrate.com: 5 Tips for Buying a Foreclosed Home
- Smart Money: Buying a Foreclosed Home
- Popular Mechanics: Thinking of Springing for a Foreclosed Home? Check for These 5 Problems First
- Bank of America: Buying a Foreclosed Home
- Portland Adult Education: Foreclosure Bus Tour
- The Vindicator: Foreclosure Bus Tours
- CoreLogic: CoreLogic Reports 830,000 Completed Foreclosures Nationally in 2011, a Decrease of 24 Percent from One Year Ago
- Joe Raedle/Getty Images News/Getty Images