Following the start of the recession and the subsequent inability of many people to pay off their debts, the number of foreclosed properties on the markets has exploded. Foreclosed properties are often sold for up to 30% less than their normal prices, because the lenders want to get back their investment as quickly as possible. This provides an opportunity for persons looking for cheap houses to buy or for investors who will buy foreclosed properties, refurbish them, and sell them for a profit.

Buying foreclosed property is different from buying normal property. The prices may be lower, but there are risks involved. Often you do not have as much information available to you, and you generally do not get the opportunity to talk with the previous home owners. The laws governing foreclosed property are different too.

When buying foreclosed property at a public auction, you generally do not have the chance to view the property from the inside. However, you should still go and see the property from the outside. Note the state of the exterior. Does it look like it has been vacant for a long time? Has it been vandalised? Are there broken windows or doors? Does the garden require extensive maintenance? Look through the windows – are the walls mouldy? How does the furniture look?

If you do get the chance to view it from the inside, be as thorough as possible. Check for leaks, and open cupboards and drawers. Check that the lights and appliances work, and test the power sockets. Inspect the sinks, toilets and plumbing. Inspect the boiler. Make sure that all the doors and windows close properly. Check what’s under the mats and rugs, and have a look at the loft.

A foreclosed property requiring extensive repair does not mean it is not a good deal – but simply that you will need to factor the cost and time for these into the equation. Most foreclosed properties will in fact, be in bad state, and previous owners will often remove furniture and appliances. If the property has been vacant for a long time, it may get vandalised or squatters may move in.

Another issue with foreclosed property is that often it takes some time for you to move in after the purchase because of the legal requirements. Make sure you are aware of all the relevant laws; these vary from state to state so you should visit a legal advisor.

Make sure you familiarize well with the process of buying a foreclosed house before making an offer. You can find foreclosed houses at very good prices; however, you also need to pay attention to some things before making a purchase.

The first step of buying a foreclosed house is obviously finding one. Good places for this include the internet, real estate agents and real estate newsletters. Once you find a foreclosed house you like, have a think about the price. How does it compare to similar houses in the area? Does it need extensive repair and how much would these cost? How long will it take until the house is restored to good standard? Are there any unpaid taxes or liens on the house?

Always make sure you see the house for yourself – seeing pictures is not enough as they might not depict the actual state of the house and will not reveal trouble areas. Visit the property and have a thorough look. What is actually inside the property? What is the state of the furniture? Take your camera with you and snap pictures; this is especially useful if you are looking at a number of properties, as you may get confused which property had what. Do you have furniture of your own that you may want to move in? Will it fit? Take a tape measure with you. Don’t forget the landscaping – does the garden require extensive maintenance? It might be a good idea to get a professional home inspector to come with you. If you are happy with the house, have a look at the neighbourhood. Do some research on the surrounding area – is it a high crime neighbourhood?

If you can, obtain information on previous tenants and the period of time for which the house has now been empty. If it has been vacant for a long time, damages tend to be more extensive as you will get things such as plumbing seals drying out, walls getting mouldy or a bug invasion. Inspect the sinks, toilets and piping. Houses which have been vacant for a long time can also get vandalised, which will push up the cost of repairs.

If you are buying the foreclosed house for yourself, make sure it suits your/your family’s needs. How many bathrooms and bedrooms do you require? Is it close to workplaces, schools and shops? Is it well served with transport links? Does it have a garage or parking space? BBQ area? Pool? If you are buying to sell, consider the current demand for houses in the area. Will it take weeks, months, years to find a potential buyer? Would it be possible to rent the house?

Get professional advice! You will be spending thousands on the house, so spending a few hundred for a professional opinion is money well spent. Ask a real estate agent how the price compares to similar houses in the area. Ask a home inspector to come see the house with you. Ask a legal advisor on the legal situation of the property.

properties are and what they entail. Basically, when a person fails to pay back the full amount of money borrowed from a lender to buy a property, the lender will take over the property from the borrower – at this point the property is referred to as foreclosed property. Foreclosure is happening more often now because of the recession. Thousands of persons had borrowed large sums of money before the recession hit, and now are failing to pay back the money lent. This may be because the borrower has been laid off from their job, because of other debts, because of a divorce settlement, etc…

When the lender (the bank) takes over the home from the borrower, the bank will want to recover its investment quickly, and it does so by selling the home at a reduced price to attract buyers. There are specific foreclosure laws which govern this process, and these do vary in different states. These laws are different than the ones which oversee a normal home purchase, and you should familiarize yourself with them. In addition, it is fairly common for foreclosed homes to be sold in auction, starting with a very low price.

Foreclosed homes vary from luxury ones in excellent condition to small properties requiring extensive repairs. It is therefore crucial that you inspect the property, ideally with a housing inspector, before you place a bid on it. It is also good idea to get the opinion of a real estate agent to gauge whether the price is reasonable. In addition, you should make sure that there are no unpaid property taxes on the foreclosed home.

Foreclosed homes are generally advertised in local newspapers, in real estate magazines and newsletters, on the internet, and government agencies. A number of internet sites provide detailed search options that allow you to look for a foreclosed home based on location, price range, size, beds etc… Those advertised by government agencies are specifically referred to as HUD (U.S. Department of Housing and Urban Development) homes. These are homes that have been purchased using a loan insured by the Federal Housing Administration (FHA). When the borrower fails to pay back the amount owned, the lender will make a claim with the FHA and then the U.S. Department of Housing and Urban Development will place the home for sale, via the same process as other foreclosed homes.

Many people are making a profit by buying greatly discounted foreclosed homes (especially those in relatively bad condition as these tend to be very cheap), make the necessary repairs and refurbishments and then sell them for a significant profit.

A special type of foreclosed homes are those referred to as ‘pre foreclosures’. This refers to houses which are at the period between the mortgage lender’s notice to the borrowers and the auction sale event. The borrower will benefit from selling the home at this time to avoid the foreclosure process and having a bad credit history; and the buyer will benefit by purchasing a home at a reduced price.