Foreclosure Home: Tips for Buying Distressed Properties

When purchasing a foreclosure home it’s imperative to understand both the pros and cons of this type of real estate transaction. Perhaps the most noticeable con is the fact that most foreclosure homes are referred to as “distressed properties.” While you might be one of the fortunate few to locate a foreclosed house in perfect condition, more than likely you will need to engage in physical labor to get the property back in good condition.

Prior to embarking on the hunt for the perfect foreclosure home, experts suggest buyers obtain pre-qualified financing arrangements. Doing so let’s you know exactly how much money you can borrow and provides extra leverage when it comes time to make an offer.


There are four options available when it comes to investing in a foreclosure home:


  1. Hire a real estate firm to bid on distressed properties on your behalf
  2. Bid on property through a foreclosure auction
  3. Buy directly from the seller
  4. Work with an REO (real estate owned) specialist


For those who have never purchased a foreclosure home, it’s highly recommended to work with a Realtor or private real estate investor who specializes in foreclosure and bank owned (REO) properties. There are many pros in working with a foreclosure home specialist including greater bargaining power, reduced closing costs and lower purchase prices.


Realtors and REO specialists can help you locate foreclosure homes more quickly than if you search for them on your own. These individuals have access to nearly every foreclosure home in the area where you wish to reside or invest. They can also help you locate distressed properties in other cities, towns or states.


If you would rather go solo, be certain to thoroughly research the area where you plan to buy. Investigate the availability of public or private schools, average property values and the anticipated property value growth in the area.


Once you determine the ideal location, it’s time to compile your list of potential foreclosure homes. When working with a Realtor, your agent will arrange viewing appointments on your behalf. If you’re working alone, you will need to contact the seller to make an appointment.


When you visit potential properties, take along a pen and paper to make note of potential problems. It’s also a good idea to take along a camera or video recorder to document areas which will require repair or renovation.


Check the house from top to bottom and make note of any structural damage, plumbing and heating issues, termites, rodents and other common problems. The more problems you can find, the better your bargaining power, so take time to thoroughly investigate the foreclosure home before making an offer.


Keep in mind that investing in a low-priced foreclosure home might not be your best bet. If the house requires extensive renovation it can end up costing more than investing in a distressed property with a higher price tag, but requires fewer repairs. Be certain the “bargain” is truly a good deal or you could end up with a house that’s a money pit.


Last, but not least, conduct due diligence to determine if tax or credit liens are filed against the foreclosure home. Removing liens can become a legal nightmare that requires a great deal of time and money to resolve.

Proudly powered by WordPress
Theme: Esquire by Matthew Buchanan.