Buying Foreclosures

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Buying foreclosures sounds easy, yet doing so successfully requires preparation. Here are twenty steps you should consider to ensure a smooth transaction:

1. Prior to buying foreclosure homes, attend a few auctions to get acclimated with the whole process.

2. Make sure you understand and meet all the financial requirements to bid at home foreclosure auctions.

3. Pre-determine your maximum bid, line up your finances and be prepared to make a cash offer if other offers are not accepted.

4. Rather if you are looking for a potential foreclosure investment or a new home, you should select a few properties from the list of foreclosures on your county's legal publications. Track your selected listings on a weekly basis until the sale date.

5. Inspect the property or properties or have them professionally inspected if you don't know what to look for. Often, foreclosed properties are the target of vandalism that may or may not be noticeable by a simple walk through the property.

6. When purchasing a foreclosure it is important to research the recent sales prices of similar properties in the area to determine the amount of your maximum bid. Make sure to check the prices of short sales, foreclosure auction sales and the average sale price of properties by homeowners not in default.

7. Order and review title work on the properties.

8. Obtain and review property records for all properties. You can get these documents from the city or county.

9. Identify the foreclosing attorney(s) and contact him or her prior to sales date of each property to find out if the auction is still on and if an opening bid has been set and how much. Also, find out if they are considering adjournment.

11. Create a file for each potential property.

10. Drive by the property a few hours before the auction to ensure property condition has not changed drastically. Often foreclosed homes are the target of vandalism.

11. If at this point you decide to move on with your bid, obtain a cashier's check for the amount of the opening bid.

12. Have your property listing file ready for the auction.

13. Keep in mind that if the maximum bid you are prepared to place does not represent a return of at least 20% (according to recent prices of similar properties in the area), you should think twice before purchasing this property as an investment. If this property is being purchased as your next long term primary residence, you may settle for a lower return on your investment, although not recommended.

14. Stick to your pre-determined maximum bid. Do not make an emotional decision.

15. If your bid is the winner, pay any balance remaining on the bid amount, record the deed, obtain an insurance policy for the property and record an affidavit for the amount paid. These actions should take place at your earliest convenience.

16. Establish contact and build rapport with previous owners to facilitate change of ownership.

17. If the area where the property is located has a mandatory redemption period you should send a letter to the homeowners to let them know you place the wininng bid on their foreclosed property, the options you can offer them, their redemption rights and warn them of other investors who may try to take advantage of them.

18. If your bid represents an amount higher than what is required to pay off the liens, let the homeowners know that they can claim the overbid money and inform them of where they need to go to do so.

19. Respect the redemption period and the loss of the previous homeowners when buying foreclosure.

20. Encourage the homeowners to move out and establish a deadline before proceeding with an eviction.

By following these simple steps you would be increasing your chances of being successful investor in home foreclosures or simply a happy new homeowner.