You’d like to become a homeowner but money is tight. Or you’re favorite neighborhood is just a bit out of your budget. If you can stretch your dollar, your goal is within reach. One way to do that is to consider purchasing foreclosed or bank-owned homes. We can help you understand how.

Understand the pros and cons

Foreclosed and bank-owned properties are a great financial deal. They can help you get into a home that you otherwise might not be able to afford. Unfortunately, they don’t come without risks. Being aware of risks in advance can help you successfully navigate the purchasing process. One risk is that in some cases, the purchaser is responsible for liens or even a mortgage that was connected to the previous owner. If this happens, it is important to identify the terms early and address them with the seller and your lender.

Another risk is that the home could be in sub-prime condition. Previous owners may not have kept up on repairs or regular maintenance tasks. Advance inspections of the property might help identify issues. Unfortunately, it might be more difficult than usual to arrange an inspection for a bank-owned property.

Start with online research

You have to find a foreclosed or bank-owned property before you can purchase it. An internet search is a great way to start. Begin by looking at bank websites, online listings for county offices, websites for lenders Fannie Mae or Freddie Mac, or government websites through the Department of Housing and Urban Development (HUD).

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Online listings will generally include a property’s address, description, price, and the name/contact information for the listing agent.

Other resources to identify properties

If an online search isn’t unearthing your perfect property, you’re not out of options yet. A little in-person detective work will help. You can visit your county offices in person and talk to staff about leads they may be aware of. You can also work with a real estate agent to identify listings. Their professional networks may be able to find deals that you wouldn’t come across on your own. There are also formal foreclosure listing services that you can take advantage of. One of these services, called RealtyTrac, will provide you with details on properties for a monthly fee of about $49.95.

Both of these options identify both currently foreclosed homes and homes that are approaching foreclosure but are not yet in formal proceedings. Purchasing a home that is about to be foreclosed upon can have significant advantages. They may offer equally strong deals but less “red tape” to go through as part of the process.

Next steps

Once you’ve identified homes you’d like to purchase, the next step is to have your real estate agent contact the listing agent for your targeted property. They can help you to tour the property and get a handle on exactly what you’re buying. Touring the property may be tricky if it is bank-owned. Your agent may have bank contacts or be experienced at working through these details in the process.

If possible, always get an inspector to look through the property. If you can’t, try to bring an experienced homeowner or someone used to home repairs with you for your walkthrough.

Negotiating the offer

When making an offer, think carefully about the most reasonable price for what you’re buying.  Your leverage with a bank on a foreclosed property may be limited, but knowing your information will be helpful. You also want to work with your agent to be sure you fully understand any terms you’ll be responsible for as the new owner.

Once you have this information and have made your offer, be patient with the bank. The process can take time. Hopefully, all will turn out to be in your favor. Then you’ll be the owner of the house of your dreams at a price you can live with.