Expect substantial repairs with any foreclosure purchase.
If you’ve decided that foreclosures are right for you, here are some simple tips to ensure that you get the right deal and don’t risk over-leveraging yourself.
Work out a budget
Map out your current financial assets and liabilities. Factor in recreation, savings, and other planned expenses, plus enough of a cushion to give you some security. The remainder is your available budget. Remember that even after the sale, a foreclosure will cost money before making it. You should expect repairs before the home is livable, followed by a period of vacancy while you shop the home to buyers or renters.
Line up financing
Foreclosures move fast–very fast. In some cases, a few minutes can make the difference between buying the house of your dreams. Now that you know what you can spend, you need to have a bank’s permission to spend it. Cash is king, but pre-approved financing is pretty close, and just the process of applying for financing will provide a good gut check of your budget estimates from step 1.
Bring an expert
The buying process for many foreclosed homes–particularly those being auctioned–leaves little time for individual inspection. Bring a licensed inspector with foreclosure experience. There’s no replacement for a roper inspection, but expert eyes can spot the biggest, most expensive issues up front and help you incorporate that feedback into your bid. Be sure to keep a running tally of repair costs and deduct that amount from your budget. You don’t want to bite off too much.
Once bidding begins, it’s easy to lose your head. The market is full of foreclosures. If you miss this one, you’ll get the next. Or one of the dozens after that. Stick to a sane bid in a range you can afford and eventually, you’ll find the right house at the right price.