How to Buy a Foreclosure

When times are tough, it seems like the rich get richer.  Today's housing market is no different.  Real estate investors with the means to buy foreclosure properties are moving quickly.  Be forewarned:  This can be a tricky business.

If you're considering buying foreclosure property, the process seems relatively straightforward:  First, find foreclosure.  Next, purchase the foreclosure.  It looks simple enough on paper, but there are many nuances to the transaction.  If there weren't, the marketplace would be cluttered with potential investors.  

If buying foreclosed property is on your radar screen and you're ready to become an expert, here are a few essential steps.

Go public to find foreclosure

Your first step in buying foreclosure property is to find it.  There are a wide variety of vendors who will offer you foreclosure buying lists.  Avoid them.  You'll be better off doing the research on your own.  Foreclosed properties are a matter of public record, and you'll likely get more accurate results doing your own search.

Start by visiting the website of the Housing and Urban Development (HUD) at www.hud.gov.  You'll find a full list of HUD homes, many of which have been foreclosed upon.  This list includes properties from the IRS, the Department of Agriculture, the Customs Department, and other government organizations.  The caveat is that each government entity will have its own purchasing process, so prepare to become adept at navigating the respective bureaucracies.

Purchase foreclosure:  Wait until the smoke clears

Many newcomers to the foreclosure process think it's easy to find a home and negotiate a deal.  This is a highly dangerous attitude.  These properties are generally an entanglement of tricky loans, liens, and legal documents.  

If you're new at the foreclosure game, employ the necessary professionals to ensure that you don't make a wrong move.  An attorney could be a highly valuable ally in the process.  You should also work with a highly skilled mortgage broker or banker to ensure that you're not acquiring any strange loans in the process.

Communities getting into the act

While many savvy investors are buying foreclosure properties, entire communities are now entering the market in an effort to save their neighborhoods.  In cities like Boston, Minneapolis, and San Diego, a mix of government and private funds have combined to buy foreclosure homes, refurbish them, and put them back on the market.  This initiative is designed to keep a neighborhood from slipping into a state of decay.  The results have been positive, with a noticeable uptick in sales in some areas.

Entering the foreclosure market is like stepping into a jungle.  There are all types of pitfalls that await the inexperienced, some of which could prove to be quite painful.  Nevertheless, it offers plenty of reward.  If you enlist a lawyer and loan officer to help you navigate through the danger zone, you could wind up with an investment that will make the journey extremely worthwhile.