Checklist for Buying Foreclosures

Considering the rapid growth in foreclosures and the potential for "bargain deals" many home buyers today are interested in purchasing properties that are facing foreclosure. It is important, however, to not only understand the different stages of buying a home in the foreclosure process but to check and see if as a buyer you are ready and qualified to have the greatest chance of success.

There are three basic stages of foreclosure in California. When a homeowner misses a mortgage payment a Notice of Default is filed and the foreclosure process is triggered, this is called Pre-Foreclosure. If the homeowner does not bring the payments current, the home will go to a Trustee Sale about four months after the default notice is filed. This stage is called the Public Auction. Finally, if the home does not sell at the trustee's auction, the bank takes the property back as REO, or real estate owned.

It is possible to find some great bargains, but to have the greatest chance of success in the purchase of a home in foreclosure ask yourself the following questions:

1. Do I have a home to sell in order to buy a foreclosure?

Most homeowners and banks are not in a position to wait for you to sell your home. In order to get the best "deal", make sure your home is either already sold or you've raised the cash from other sources.

2. Do I need a loan to buy this property?

Because you often have to act quickly it is important to contact a loan agent for a pre-approval letter before you find a home. Not only will you know how much house you can afford, but you will be a stronger buyer especially if there are competing offers for the same house.

3. Do I have a timeframe within which I need to purchase a home or move?

There can be many delays in the purchase process of a home in foreclosure. The old adage "Patience is a virtue" never rings more true than when buying a home that is being foreclosed.

4. Do I have extra resources or lots of "elbow grease" to fix up the property?

Most homes in the foreclosure process are sold "as is". Distressed sellers do not have the funds to make repairs and most banks are not in the business of fixing up properties. Make sure you hire a home inspector to know what you are getting and then be prepared for a little "sweat equity".