As with any major purchase, do your homework. We recommend that you search reputable online databases such as http://www.RealtyTrac.com for foreclosure listings. If you are considering purchasing in an unfamiliar area, research the neighborhoods, schools, and market prices.
Always drive a hard bargain when purchasing a foreclosure. Generally, foreclosed properties should sell at least twenty percent lower than similar homes under a traditional sale. You may be able to negotiate an even better discount if there is an excessive amount of foreclosures in the area.
DO Work with a licensed real estate agent in the area where you are purchasing.
Always work with a licensed real estate agent from the LOCAL area of where you intend to purchase. The realtor you select should be experienced in foreclosure and distressed property sales. Your realtor will have access to the multiple listing service data and can provide information regarding the price of comparable houses.
DO Get financing before you begin to shop.
Your bargaining power is increased if you are prequalified for financing.
DON'T Succumb to impulses and buy at auction unless . . .
Unless you are comfortable with substantial risk, do not buy property at auction. Properties sold at auction may be in poor condition or have liens against them. If a lien encumbers a property and remains after your purchase, it will cost a lot of time and create many legal headaches to resolve.
DON'T Make an offer before inspecting the property.
Always inspect a foreclosed property before making an offer. The key things you want to look for are water or insect damage and structural problems. Yellow staining on ceilings and walls usually indicates water damage. Cracks in stucco, drywall, and concrete may indicate structural problems.
We recommend that you hire a professional to inspect the HVAC, electrical, and plumbing systems.
If you determine that major repairs are needed, get an estimate of costs from a licensed contractor.