There are four major ways by which to buy foreclosed property. These are briefly explained individually in this article . Please consult a real estate lawyer for more authoritative information, especially since foreclosure laws vary from state to state.



* Purchasing a foreclosed property from a bank is arguably the least risky method of buying foreclosed homes purchased by a bank a foreclosure auction. The fact that the bank had to buy the property typically means that no one else wanted it. Of course, one reason could be that the property is in need of expensive repairs, but another reason could be that people are not into buying these days. For foreclosed property, especially if it is sold as is, professional inspection for structural flaws and needed repairs is particularly important. Typically banks have paid all outstanding debts on a foreclosed property thus insuring the new buyer a clear title.

* Buying the property directly from the owner prior to the auction date may be beneficial to both you and the to the homeowner facing foreclosure. The owner of the property will most likely need to be given a sum of money in exchange for the equity in the house. Keep in mind that the homeowner may not inform you of existing debts on the property. Make sure you examine this yourself. If you discover existing liens, contact the liens holders and see if they are willing to settle with you " at a discounted rate. Again, check the house for repairs that are need. Subtract from the property's fair market value all costs including the home owner's payoff, any liens on the property, as well as necessary repairs. Once you have determined the home is priced no more than fair market value and have reached an agreement with the current owner, hire a real estate attorney to prepare a purchase agreement.

* Buying at foreclosed property at a foreclosure auction is only recommended if you are an experienced property buyer. The entire purchase price must often be paid in an extremely short period, sometimes in cash. Also, it is often not possible to inspect the property. You need to be aware of all outstanding debts and liens on the property because, as the new owner, you'll be responsible for them. Junior liens are defined as debts which exist in the property subsequent to those debts that caused the home to foreclose. All foreclosed properties offer the original owner the "right of redemption" which allows them the opportunity to purchase their home back within a set time frame. If there are back taxes owed on the property, the IRS has 120 days during which it is legally entitled to redeem it. One should obtain a complete title search and set up the financing needed prior to attending the auction before buying foreclosed property.

* The final means by which you may buy foreclosed property is to purchase a house from the federal Housing and Urban Development, HUD. These are foreclosed properties, but the HUD pays a small percentage of the closing costs. In addition, most HUD houses that are approved for Federal Housing Administration mortgages are appraised. When purchasing a HUD property, you are required to do so through a broker or agent.