4 Tips for Purchasing a Foreclosure

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4 Tips for Purchasing a Foreclosure

Staff Writer · Jan 12, 2010

Purchasing a foreclosure is on the rise during the current economic recession. More and more bargains are available to first time homeowners and veterans alike, as individuals across the United States are finding it a financial hardship to keep up with mortgage and property tax payments. If you’re looking to buy one these properties, you could make a decent profit if you follow these 4 tips:

1. Finding Foreclosures

You don’t need to leave your home to find foreclosures. For a small fee, you can use services such as www.foreclosure.com, to search many foreclosures for sale. Websites such as these are a great place to start, but don’t stop there. If you live in or near an area where the local economy has hit hardest, you’re sure to find distressed properties. Be careful with this strategy though, because you don’t want to purchase a foreclosure that will only continue to depreciate because of high crime rates or other issues. While you will find bargains in certain neighborhoods, you might end up with a problem more than a deal.

2. Do Your Research

Learn everything you can about the property before making a purchase. You can contact the county clerk to learn information about the title and taxes on the property. Find out what you can from the bank, and ask the neighbors next door. Visit the property and conduct an inspection. It’s probably a good idea to hire an inspector to check for structural damage, plumbing problems and a host of issues that you might end up having to pay for. This will help you to determine how much to pay for the property, or if it’s even worth buying.

3. Avoid Lemons

You wouldn’t buy a lemon car, and you shouldn’t buy one that’s a foreclosure either. If you get the inspection report and see that it will take a lot of money, time and management to make a property inhabitable, then walk away. A low price can be tempting, especially if you’ve invested some money to hire an inspector and paid for a search service to find the property in the first place. For example, homes were advertised for $1 in the Detroit, Michigan area in 2009. As you can imagine, those properties required a lot of work, and the purchaser was obligated to rehabilitate the property in a specified amount of time.

4. Hire an Attorney

This is one situation where you don’t want to do the paperwork yourself. Hire an attorney when purchasing a foreclosure to avoid legal and monetary problems down the road. Not all lawyers are equal, so it’s important to find one that has experience with foreclosures. They’ll know what to ask for in the contract, and can negotiate terms to your benefit. They can also make sure that all is well with the title and deed on the property.

While purchasing a foreclosure can be one of the greatest deals available to you, it can also have its pitfalls. Do your research and get an attorney, and you could live in or rent a property that eventually appreciates in value.

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