Home prices are falling all across the country, but foreclosures are on the rise. If you’re in the market to purchase a home and have been considering a foreclosure, it can become a stressful and risky business proposition if you’re not familiar with some very crucial basics about buying properties in foreclosure.
The Better Business Bureau (BBB) cautions buyers looking into foreclosed homes and offers the following tips:
- Know your options. Homebuyers can purchase foreclosed properties through pre-foreclosure, which allows you to purchase a house directly from the homeowner before it goes into bank foreclosure, at auctions where you will bid against other interested buyers, or properties that are Real Estate Owned—also known as REO.
- Conduct a “title search.” This process can help you find out whether the property has a second mortgage or lien against it. If it does, you may be responsible for paying off the initial mortgage, any second mortgage loans and any liens on the property before you can take ownership.
- Be aware that if you purchase the house in an auction, you may not be able to look inside the home or conduct a home inspection before the sale. Properties sold at auctions are usually sold “as is.” This can create problems when trying to obtain a mortgage loan.
- Get help if you need it. Find a real estate agent who is experienced in foreclosures and check them out with the BBB (www.bbb.org). The BBB offers free reliability reports on more than three million businesses.
- Ask your agent to check nearby or comparable homes to see if the asking price for a foreclosed home is, in fact, a good deal.
- Foreclosure laws vary from state to state so check the laws in your area by contacting your county clerk’s office.