Looking for a house repossessed by the bank can be a good way to get a great deal on a property that might be undervalued, from a seller that’s heavily motivated to sell. However, dealing with a bank can be a lot different than dealing with a seller, and you’ll need to be ready for some of the peculiarities of the foreclosure market.
Being ready to flip foreclosures: Besides buying your own house this way, it can be tempting to use foreclosure auctions as a chance to snap something up cheap and turn it around for a quick profit. This is certainly possible, but remember that some houses might need a lot of time and money invested to be ready. You might want to look for something that will be easier to take on, or something that will benefit a lot from just being upgraded.
Have funding ready: Most repossessed houses are sold at auction, and if you do buy something you’ll typically be asked to come up with a significant down payment right there. You’ll want to have access to at least ten percent of your upper price range, and have your loan financing in place already.
Inspect beforehand: If you can, get a good look at the property being offered before the auction so you can get a good sense of what you think it’s worth, what you can do with it, and whether it might be the right house for your purposes. Mortgage sales are typically sold as-is, which means that if a lot of work is needed, you’ll be the one getting it done. If you can’t be there yourself, try to send a representative whose judgment you trust. Take a close look at the current appraisal to determine how much value you might be able to add.
Understand the auction process: Again, you should be there in person if at all possible, and if you can’t, you need to be able to trust the agent representing you. There can be a pretty high level of emotion involved, so you’ll need to be careful not to forget your budget and other considerations. Don’t be afraid of being outbid—if you lose one house, odds are that you’ll be able to find another.
Banks tend to be more interested than other sellers in getting business settled quickly, but tend to be less flexible in their requirements and in non-auction sale prices. As long as you know what you want, though, it can be a good way to find your next home or a good investment.
A good thing to do is to stay up to date with your local agent, they may have listings where the vendor is being forced by the bank to sell and can help arrange an agreement between you both. You can find your best local agent here.