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How to Buy a Foreclosure

Nowadays most people wants to buy a foreclosure, whats-wrongwhether for primary residency or an investment…  There are three options of foreclosure that you can buy:

  1. pre-foreclosure;
  2. sheriff’s auction;
  3. repossession, or REO (real estate owned by the bank). 

Each option has great benefit, pressure and pitfall in the current real estate market.

Pre-foreclosure: These homes are in the foreclosure process, but they have yet to be sent to auction.  Potential buyers must negotiate with the lender as well as the owner, which makes the process complicated and slow, and usually ends up with a higher selling price than at other stages of foreclosure.

Sheriff’s auction: These sales yield the lowest prices, but they are fraught with difficulties.  Often the house is unavailable for inspection, leaving buyers with a long list of expensive repairs — and much larger bill than they intended.

Repossession: This occurs after the home has gone through a sheriff’s auction but does not sell and the bank gains possession of the property.  Sometimes the bank will pay for some repairs related to health and safety issues but not anything cosmetic.  One good advantage is the bank wants to sell quickly and your buying process can be the fastest among other foreclosure methods.

Common Mistakes

Caught up in a bidding frenzy;

Underestimating repair costs;

Not knowing comparable properties sold price;

Buying in a neighborhood flooded with foreclosures;

Not having financing in place

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