How to buy a foreclosure home

Posted by Frank Jenkins on March 11, 2010

If you are looking for good investment opportunities in these tough economic times then buying a foreclosure home might be perfect for you.  A foreclosed home is a property that is owned by a bank when the current homeowner could not keep up with their mortgage payments.

These properties offer the chance at a great investment because they can be bought at such a discounted price.  With the struggling economy foreclosures can be purchased for as cheap as 30% - 40% below market value and then sold for only 5% below market value which will make for a nice return on your investment.

To go about buying a foreclosed home you will need to get a list of properties in the area you are looking to buy.  There are several magazine and newspaper publications that you can use to locate foreclosed properties.

Also, many areas will hold auctions at a county courthouse where you can actually purchase a foreclosed home.  The downside to purchasing a property at one of these auctions is that you will not actually get to see the house or inspect it so you do not really know what you are purchasing.

To help find the best bargains you will want to thoroughly research your options before deciding to buy a home.  Contrary to most beliefs foreclosures are not only readily available in low income housing areas they can also be found in some of the more affluent parts of town.  These properties will most likely be in better condition making them easier to resell and quickly turn a profit.  If you are looking for the best chance to make the largest profit possible then you may want to consider purchasing a home that is in need of some major repairs.

When some of these houses are in real bad condition this can lower the asking price of the bank but also present an easy opportunity to quickly increase the value of the property.  With a few maintenance fixes your new home could significantly rise in value without the market conditions changing.

One thing you will want to keep in mind when thinking of investing in foreclosed homes is that you should have a great credit score before looking to make a purchase.  When you have a high credit rating banks are much more likely to loan you the entire amount needed for the foreclosure.

Also, if the new property is going to be rented out then you may only need to make a down payment of 10% in order to make the purchase.  So as you can see having a great credit rating when looking to invest in foreclosures will considerably assist you in the process.