When a house is sold or a homeowner fails to bear the mortgage, it becomes a foreclosed property. Buying a foreclosure house for sale   can be an excellent way to bag a deal when you need a real estate property. Consequently, real estate lenders assume ownership and attempt to sell the house to recoup some costs. Even though foreclosures are not as common as they once used to be, they do happen.

In this article, we share some essential tips for buying a foreclosed home: 

Check your buying options
Here are the most popular ways to buy foreclosure houses for sale: 

Short sales
When a home’s value declines and the owner sells the property for a price lower than what they owe on the mortgage, it is a short sale. In this case, a foreclosure did not occur and the homeowner still possesses the house. So, if you need it, you will have to work with a realtor. When you buy a short-sale home, the lender approves your offer, and the process usually is tedious.  

Auctions
Typically, buying foreclosed homes in an auction is faster than working through banks. Homeowners can buy the property below the market value in auctions. But most auctions accept only cash payments, so you need a significant amount handy. However, if financing through a mortgage is allowed, have a pre-approval ready. Buying foreclosed homes at auction implies that you are willing to purchase the property without any inspection or appraisal. So, the risk is usually high for foreclosure houses for sale at auction.   

Buying from lenders
No homeowner is involved in a lender’s real estate-owned property. In the case of bank foreclosed homes, lenders will clear the title. So, the lender dismisses the present homeowner before you get this property, but they do not sell directly to an individual. Channel your way through a real estate agent. These homes fall under the “as-is” category, but you get to order an inspection and check the property before closing the deal. 

Government-owned property
You can also consider government-owned foreclosure properties. These properties are relatively similar to bank foreclosed homes. In this case, government agencies hold the homeownership after the previous owners have defaulted on federal government-issued mortgage loans. These homes are also as they were left. So, all repairs are your responsibility. 

Hire an experienced agent
If you wish to buy a foreclosed home, find an experienced real estate agent for the task. Agents not only know how their local market functions but also have access to a local multiple listing service. They can inform you anytime a foreclosed home lists at a high asking price, given the risk, or is available at a bargain. An agent can also help you get your hands-on foreclosed properties that others might miss. In addition, a good realtor will discuss challenges that you probably experience with a foreclosed property. 

Understand your budget
Knowing what you can afford is essential when shopping for bank foreclosed homes or other foreclosed properties. You need to ensure that the property taxes, the cost for the mortgage, and the insurance are not higher than 36 percent of your income before deductions and taxes. 

Bid higher if other foreclosures sell quickly
A foreclosed property mostly always attracts stiff competition in the market, so increase your bids. Unfortunately, there is no bottom line on bank foreclosed homes .  If the foreclosed homes are selling rapidly, you need to sit down with your agent and devise a solid offer; backed by a pre-approval letter if you are taking a loan. Typically, the foreclosures are available at a discounted price. So, if you offer too low, it is a non-starter for the bank. 

The location and type of house play significant roles when it comes to bank foreclosed homes. Also, some homes tend to sell faster than others. If you are dealing in a competitive market, you should be prepared to offer the asking price or even more when there are multiple bids.   

Pay for the inspection
After you have put an offer on the bank foreclosed homes or any other foreclosure property, you will have some time to arrange an inspection. But inspecting the property before putting down an offer is the best step to take if it is allowed. Depending on your preferred alternatives, inspections can cost you anywhere from $400 to $800. 

Foreclosed homes require a thorough home inspection, including extras like radon and termite check and a water line and sewer assessment. The more you know up-front about the home’s condition, the better.

Resolve liens
Most foreclosed homes have more than one loan on the property. The past owner might have the primary and a piggyback loan from a different lender. You should reach out to a trusted title company to help you sort the liens and overcome any potential conflicts before proceeding with the loan. If all works well, close the deal, and you will have the keys to your new home. 

Buying foreclosed homes is not everyone’s cup of tea. Performing the necessary renovations and securing the funds take a lot of time and energy. All of these efforts can be costly and time-consuming. But, if you are ready to do the research work and bag a lucrative deal, buying a bank foreclosed home can save you thousands of dollars.