How would you like to purchase 20-30% below-market-priced homes and selling them at market values? This high discounts are what lures both novice and seasoned investors to go into buying foreclosed properties. However, buying foreclosures are not as easy as it sounds. It takes some art and avid techniques to get huge benefits from foreclosures.

General guidelines on how to buy foreclosures

Obtaining information and techniques on how to buy foreclosures should be the first consideration especially for investors who are new to the field. Elements such as the current condition of foreclosed properties, local laws covering foreclosure, and the advantages and disadvantages of buying during pre-foreclosures or at auctions are worth investigating.

Some states, such as Ohio, Pennsylvania, Florida, and New York require the lender to file a lawsuit against the debtor and obtain a court order to put the property on sale (called judicial foreclosure). California and Texas, as well as other states, have laws that do not require such judicial proceedings.

Buying from pre-foreclosures

Foreclosure begins when a debtor has fallen behind in mortgage payments, which causes the lender to send a Notice of Default usually 30 days before finally closing the property (some generous states like New York have foreclosures that last for 15 months!). Seasoned investors generally tap into the scene at this point but, expectedly, you’ll be dealing with distressed families making it difficult to build rapport.

Moreover, many of these families have been struggling financially for almost a year before their homes are given up for foreclosure, which further means seeing homes that have not received maintenance and repairs for some time.

If you’re interest is in learning how to buy pre-foreclosures, you can get help from real estate websites that continuously provide foreclosure listings in various states. Some of these websites require you to pay monthly or membership fees to be allowed access to their database. Government foreclosed properties are listed in websites that allow free access to online visitors.

Pre-foreclosure prices lie somewhere between 20 and 30 percent below market values making them a good bargain, although you’ll have to be the one to put up for the cost of repairs. The secret is to choose locations. It is a common misnomer that foreclosed homes lie in crime-ridden communities – foreclosed homes are as prevalent in affluent neighborhoods as well. No matter how basic the home is, a good location puts it at a higher market value.

Buying at auctions

The next stage in foreclosures is when the property is up for auctioning which is usually made in the local courthouse. This is rather more difficult for regular buyers looking to buy second or vacation homes, and wanting to purchase foreclosed properties because financing is not allowed. Instead, properties need to be paid in cash.

Additionally, you will have to buy the house with sight “unseen”. On top of that, title insurance is not allowed so that if the house has a $80,000 tax lien, you will be the one to shoulder that. Experts often describe auctions as the most risky means to buy a foreclosed property.

Buying foreclosed deals

Often, the negotiation will be between you and the bank or its real estate agent, and many properties sold at this point are already pegged at near market or market high values. Thus, it’s difficult to get a bargain since most properties have been remodeled or have received touch up repairs to make them marketable.

Another way to buy foreclosures is through government-owned homes, which give the privilege to regular buyers for the first 45 days before they are given market exposures.

There are different techniques on how to buy foreclosures and it’s up to you to decide which one (or two) works best in your situation.