With real estate prices at an all time high, foreclosed properties aren’t the hot commodity they were once considered. While you can occasionally find a great deal in a foreclosure you aren’t looking at significant savings over the appraised value anymore, for the most part. You are also looking at homes that are generally in some state of disrepair (it’s fairly safe to assume this since the owner most likely didn’t have the funds to make the house not much less maintain the home) and will require a different kind of investment after the sale.
However, if you’ve found a home that you absolutely love for whatever reason (the house itself, the school district, or the community) that is a foreclosure it is still possible to get a little more house for your buying dollar. Just don’t have expectations of paying pennies on the dollar as that rarely happens no matter what you read.
If you chose to buy a foreclosed HUD home, be aware that they are priced within the fair market value for the area minus the cost of repairs that may be needed. You most likely will not be getting a serious bargain on these unless you are in a position to do the repairs for yourself or know someone who is willing to do them for you cheaply (you will save more money in labor than you will save on the home). Keep in mind that HUD homes are sold by a bidding process and if you want to have an inspection you should do that before you bid on a HUD home.
There are several books available on buying foreclosed housing, each one offers a different method for doing so and no one method seems to stand out as any more valid than any other method. In all honesty though, the current demand for housing isn’t conducive to a buyers market. If you don’t want the home for the asking price, chances are (as I just discovered the hard way) there is probably someone else who does. And banks have no remorse over selling your dream home right out from under you, particularly if they are unimpressed by your offerings. At the same time, submitting a low offer for a foreclosed home that has been on the market for a little while may be the way to go. A bank makes no money if the house is sitting empty and it is in their best interest to sell and to sell quickly. If no one is biting at their price, they may have to lower their asking price or risk another month where the property is generating no income.
Keep in mind that foreclosed properties are generally sold as is which means that the selling institution makes no guarantees and offers no repairs. Buying a foreclosed home is a risky procedure and should not be done lightly. You should expect a serious investment of time and energy into bringing a foreclosed home back to its former glory. Many of these in addition to facing neglect before foreclosure have been sitting empty for quite some time while waiting for actual ownership to divert to the bank and for the house to become saleable.
I guess it sounds as though I’m trying to talk you out of buying a foreclosed home and that isn’t the case at all. I do however, urge extreme caution in the buying process, particularly if you’ve never done this before. It can be a rewarding experience where you get a lot more house than you could afford otherwise (particularly if you can do the work that is needed for yourself) and it can also be an extremely rewarding process. Just remember to exercise great caution in the buying and bidding process so that you aren’t the one left hanging when all is said and done.