5 Mistakes to Avoid When Buying a Foreclosure

Foreclosure filings were reported on more than 424,000 U.S. properties during the first half of 2017, which means there are plenty of opportunities for those who want to invest in the foreclosure market.

Be aware that buying a foreclosure can be difficult. Buyers who don’t do their research can make costly mistakes.

Zillow surveyed real estate agents to find out the most common mistakes when buying foreclosure properties. These are their top tips to help you avoid costly blunders.

1. Don’t limit yourself

It’s okay to start your property search with an intention to buy a foreclosure. But don’t assume that those homes are the only ones you should be looking at. There are many competitively priced foreclosures available, but the same applies to traditional listings.

Foreclosures are often accompanied by baggage, such as liens against the property or repairs that are needed. Traditional sellers might be more flexible in terms of repairs and negotiating price. You might not find the right neighborhood or the home you want if your search is restricted to foreclosed homes.

Don’t rule out anything. You will find the best house for your budget if you keep an open mind.

2.

Don’t do it alone

Find an experienced real estate agent who is familiar with the complexities of the foreclosure marketplace. You will need to consult a professional who is familiar with buying and selling these types properties in your area, whether you are looking for a short sale, pre-foreclosure or bank-owned property.

It is important to remember that real estate agents do not have the legal rights of lawyers. It is difficult to understand the regulations and laws governing foreclosures. They vary from one state to another. Do not rely on your agent to provide legal advice. Instead, consult a local realty attorney who is familiar with how these purchases work.

3. Know your stuff

Know how much you can afford. Know the area where you want to live. Know the process. It is important to secure financing early so you can qualify for the property. Pre-approval will give you more bargaining power when it comes time to make an offer.

Target one or two neighborhoods to avoid being overwhelmed by listings. Ask your agent for information about listings in these areas that meet your other criteria such as size or cost. To get a feel for the market, check out comparable sales.

Even though you are working with a qualified agent or lender, it is important to do some research upfront to get to grips with the basics of the foreclosure process. Knowing the language will help you build credibility and show that you are serious about this purchase. Basic knowledge can give you the bargaining power that you need to negotiate a lower price.

4. Do not skip the inspection

The house looks great, but what’s the truth behind the walls and floorboards?

A Harris Interactive survey found that 72% of U.S. homeowners believe that a home inspection performed when they bought their current residence helped to avoid potential problems. 64% of respondents said that their home inspection had saved them money.

The American Society of Home Inspectors website contains a searchable database of inspectors.

Tag with you while the inspector is inspecting the property. Ask questions. Take notes. Most inspectors charge $300 up to $500 for services. It’s up to the customer to determine how much it will cost to fix problems.

5.

5.

A foreclosed property may lose even more value over time, so it is smart to think long-term when approaching the transaction. You may want to quickly resell the property or flip it, but what if that doesn’t happen? Are you ready for the long-term? How much will the property cost if it is held for five years or 10? years? You may be able to suffer financial consequences for the rest of your life.