Monday, March 5, 2012

5 Steps To Buying A Foreclosure

No. 1: Focus on REOs if you're a novice

Focus on REOs if you are a novice

Inexperienced buyers should probably steer clear of foreclosure auctions and possibly even short sales, focusing instead on REOs.*

Short sales can involve lengthy negotiations with lenders for approval, while foreclosure auctions require all-cash payments. You also can't inspect a home that's facing foreclosure auction, because its current residents still own the property and don't have to let you in.

By contrast, REO deals are very similar to traditional home sales. Lenders typically hire real-estate agents to show REO properties to would-be buyers, and also allow home inspections and the use of mortgages to finance purchases.

At the same time, REOs generally offer the lowest prices of any distressed properties. Blomquist says that they're often in the poorest condition and that banks frequently discount them heavily to promote a quick sale.

A bank isn't emotionally attached to a REO — it's just looking to recoup as much of its losses as possible," he says. "So the lender is often more willing to capitulate on price.

*An REO or Real Estate Owned property is a home that's been through the foreclosure process and is now held by the lending institution.

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