Things to watch out for when buying a foreclosed home

To many people want to run and buy foreclosures before they know what they are doing. Buying foreclosures can be a way to make money and it could be a way to lose your life savings, so be careful before buying foreclosed homes. This article will give you some legitimate ways to find foreclosed homes and what to watch out for.

First consider many things here and please understand the differences. Short Sales are usually homes in foreclosure, but not foreclosed homes. You can buy a short sale, but at slightly less than market price. There is no way for an investor to make money buying short sales, as they must appraise. The banks will not sell the home for less than what they could get elsewhere. They will choose to let the home foreclose and place it back on the market theirself.

A foreclosed home is one where the owner has already lost the home and it is being auctioned on the court steps or available through many sources. A foreclosed home may still have the owner inside the home and you may have to evict the owner. A foreclosed home is not open for inspection, so the most you get to see if by a drive-by. Now, if you are buying a bank foreclosed home, they have already evicted the tenant and have raised the price to accommodate cost involved in the transaction.

The best buy is on the steps of the courthouse, but you must take the responsibility for the repairs, evicting the tenants and even paying off the 2nd and 3rd mortgage. So it is necessary to hire an attorney to protect yourself. When purchasing a foreclosure on the steps of the courthouse, you need to have a fairly large down payment ready to give them on the spot and your financing already set up.
The funds must be in the form of a cashier's check. If the second is owed money, they will be on the steps also and you must agree to pay them, so purchasing a foreclosure is not all that easy. You need to have searched the title prior to the sale to look for all liens to protect yourself.

Where can you purchase foreclosures:

1. Contact a reputable Broker. Especially in todays market, there are tons of Brokers or Realtors working foreclosed properties. They will have a list of all available foreclosures and can help you protect your savings and yourself.

2. HUD homes for sale. You must go through a Broker to buy a HUD home, but you can search the listings yourself. You cannot bid yourself. You must be represented. HUD homes generally go on the high end, but have low down payments and quick financing.

http://www.hud.gov/homes/homesforsale.cfm

3. You can contact any Bank and ask to speak to the REO department. This is also called the loss mitigation department in some banks. Ask for a list of properties for sale and they will help you. They may want the loan with their bank, but that is no problem if you are qualified.

4. You can contact the US Marshall's Office. These homes were taken because of drugs, firearms or alcohol and they have a list available for sale. 

http://www.usdoj.gov/marshals/assets/nsl.htm

5. You can contact the VA. They have many homes for sale and some homes for as little as $1 down if you qualify.

http://www.homesales.gov/homesales/mainAction.do

6. The IRS has foreclosures also. These homes have been repossessed due to tax liens. You can get a list of properties from them also.

http://www.treas.gov/auctions/irs/cat_Real7.htm

As you can see, there are many safe places to buy foreclosures. If you are a learned investor and know how to do the foreclosed property route on the court steps, then those are your best buys, but if not, try some of these links to protect yourself.

Foreclosed Houses: How to Get Your Dream Home for Less

This is a buyer's market and there are hundreds of foreclosures available. Now that President Obama is putting forth a new plan to aide the short sale market, more and  more homeowners will be looking to sell their homes quickly.  So buying your dream home just maybe easier than you thought.

Oh if life was just that simple to get my dream home for less and much less through a foreclosure sale.  Does it not make sense if you are going to buy a home that it would be a foreclosed home?  Yet, better buying a home from a seller who is in foreclosure to save him from going through the process.  Well, I sure wish it was that easy.  Read on about how to do this:

All the Internet is a buzz about foreclosures.  I am sorry, but foreclosures have been popular since I first started in Real Estate back in the 80's.  People or investors have been buying them up like crazy, renovating and then place them back on the market and becoming rich.  Those investors are now writing books on how to become a millionaire with no money down.  Things have changed since the 80's on how to buy foreclosures, but the deals are still there.

Buyer Beware Should be Stamped on Every Foreclosure Sale:

A first time home buyer cannot and I mean cannot show up on the courthouse steps and purchase a home without legal representation.  First you must be willing to pay cash for the home in many states such as California and second you have to be willing to satisfy all the liens against the property.  Most lien holders will show up on the steps also to get their money.

A smart way is to have a title report before going to the auction and see exactly what is showing against the property.  Then you need to evict the owner of the property, which is not that easy to do.  After you evict the tenant, you need to make the repairs done by the angry tenant.  The costs are mounting here and your once very good deal for your dream home, just may end up costing you more than one that is currently on the market.

Where to Look for Foreclosures:

There are a number of ways to buy foreclosures.  As I have discussed above, the best deals are on the court house steps, but this is also the most dangerous way to buy.  Understand that if you purchase through a bank or other government owned place the price will be more.  The good part about most foreclosures on the market is that the tenant will be evicted at this point and some repairs will be made except for HUD homes.  They do allow you to finance the repairs necessary on the home.

The places that have foreclosures are:

1.  HUD homes through sealed bids.
2.  FHA homes
3.  Fannie Mae and Freddie Mac homes
4.  VA homes
5.  Bank REO's (also known as the loss and mitigation department)
6.  IRS and the Marshall's Office
7.  Local real estate office

Websites That Have Foreclosures for Sale:

One of the main websites to search for all listed foreclosures is Realtor.com.  They are the largest researched site on the web.  Every home that is listed on the MLS (multiple listing service) will be available to them and no other place will have more.  There are many sites that advertise foreclosures and they charge for their service.  This is not necessary and most of the time a rip-off.

When searching for your dream home it is best to contact several real estate agents and ask them to search for the best deals and to call you when they have what you are looking for. It is not necessary to commit to one Realtor, but commit to the one who brings you the best deal.  Contact your local title company and ask for a list of all foreclosed homes.  Once you get this list start sending out letters to the homeowners offering to buy their homes.

Many foreclosed homes can be bought with little money if you are dealing directly with the homeowner.  Many times you can agree to assume the loan or do a lease on the property. With more and more foreclosures everyday, creative financing is ever popular.  Sad to see a family lose their home, but if you can help them out of a bad situation it is better.  Remember to always check with an Attorney before agreeing to any deal if you are going through a private owner.

Earnest Money - The Tool Used Against Home Buyers

Earnest money is just that, a deposit in Escrow that states you the buyer, wants the seller to withdraw the property off the market for so many days. You earnestly promise to purchase the property if the seller agrees by signing legally binding escrow instructions. This tool, the earnest money deposit is held against the buyers many times as leverage to force him to buy a home at any price.

The buyer who earnestly tries to purchase a property and then cannot through no fault of his own is entitled to his money returned, but many times a Broker or Seller will pressure the buyer to stay in an escrow against his will. He is pressured to accept a home he is not happy to purchase.

Ethical Behavior is Just Good Business:

This is where ethical behavior comes into real estate. It is unethical for a Realtor to hold the earnest money as a tool against the buyer. It is unethical to require a buyer to purchase a home, unless there is not a valid reason to proceed. But, like many things, it happens every single day.

A really good ethical Realtor would never require a buyer to pay a large amount of money in escrow to begin with. On a small home, $1000 is sufficient. If there are bidding wars going on, then a larger deposit is required. Sellers do feel better with an offer that has $2000 or more, but it is a useless scenario.

The buyer always win in the end, if he knows anything about real estate at all. He signs a contract guaranteeing him arbitration. The arbitration clause states the most he can lose is $1500 in most states. So even if they went for everything he has, that is the most he can lose. Most agents who follow their brokerage, knows that it is against policy to hold a buyer against his will in a contract. As with sellers, they are released automatically with a little pushing.

No brokerage wants to be involved in a lawsuit. If the buyer will just say the words, "Lawsuit" they will set him free. But hungry agents and hungry Brokers today in this awful market play the trump card and threaten the buyer, that he will be sued for the entire amount of the home, which is correct. The buyer can be sued if the seller presses charges, unless they signed the arbitration clause.

But unethical brokers and unethical agents will pressure the buyer, by not telling him the truth. They will tell him all kinds of bad things just to get one "lousy" paycheck. That buyer will tell everyone how he was treated and they will lose more business than it was worth. The buyer will remain in the deal, but he will not be happy and an unhappy buyer will tell 9 people. A happy buyer will tell one person.

It is never worth the consequences to hold a buyer in a contract when he does not want to purchase the home. It is very sad today as many buyers will go and see another home they like better and try to break their contract illegally, causing everyone hardships. The seller lost prospective buyers for his home by taking it off the market and the agent loses the commission. In the times of hardships, everyone is suffering. It seems more and more that not only are Brokers unethical in some cases, but buyers are falling into the trap also.

Many unethical Brokers are also soliciting buyers when they know they are in a deal already. It is against every rule, that the Board of Realtors maintains. An agent can be brought up on charges for soliciting another persons client. A Broker has a fiduciary duty to his client and a client owes loyalty to his Broker.

Legally the buyer is entitled to cancel his contract for many reasons.

1. Does not qualify for the loan.

2. The house does not appraise.

3. The house fails the home inspection.

4. The seller refuses to repair items on the home inspection.

5. The title report shows the owner of the property is not the one signing the contract.

If any of these items come up, the buyer has a right to cancel the contract and receive all his money back. The only way this can happen though is with signed cancellation instructions in escrow. Should the seller delay, there is very little the buyer can do other than threaten to sue or go to arbitration.

Many sellers will delay hoping the agents put the deal together and in some cases it does happen. It is never a good thing to threaten your buyer or place him in jeopardy. It is better to cancel the contract and place him in a different home. If he does want a new agent, then hopefully down the road he will refer to you a buyer. Keeping your reputation clean is more important than winning $500.