5 Steps to Buying a Foreclosure
BOSTON (MainStreet) -- With more than 1 million U.S. homes in some phase of the foreclosure process, great deals abound -- if you know how to separate the wheat from the chaff.
"The No. 1 reason to buy a foreclosure is the potential for a good bargain," says Daren Blomquist of RealtyTrac.com, which follows the U.S. foreclosure market. "Distressed properties have always come with a built-in discount -- even before today's foreclosure crisis."
|Would-be foreclosure buyers should tread carefully, since properties are typically sold "as is."|
RealtyTrac figures show the average "short sale," or distressed property, sold at a deep discount by a homeowner at risk of foreclosure fetched just $192,129 in the second quarter. That's 20% less than the $241,715 the average nondistressed home sold for.
"Bank-owned" properties, or homes lenders have seized through foreclosure and have put up for resale, sold for even less. Also known as "real-estate-owned" properties ("REOs" for short), bank-owned homes went for only $145,211 on average during the second quarter -- 40% below the average for all housing sales."Foreclosures might not be for every buyer, but we believe they represent a great opportunity for many buyers," Blomquist says. Still, he recommends would-be foreclosure buyers tread carefully. After all, foreclosed homes are typically sold "as is," even though many fell into disrepair as their former owners struggled with money troubles. Some ex-homeowners also damage homes on their way out the door, while other properties sit vacant for months or years -- attracting vandals or falling further into decay. How can you tell the good from the bad and the ugly? Here are five things Blomquist says smart foreclosure buyers should always do:
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV