Tips for Buying Foreclosured Properties

Buying foreclosed properties can be extraordinarily profitable for smart investors. However, there are some "rules of the road" that you need to obey in order to maximize your chances of making money. Here they are:

1. Find your own properties to buy.
Too many investors rely on real estate brokers to find them properties to buy. Ever wonder where agents get their listings? They contact bank asset managers who are in charge of getting the banks' properties sold. You can get in touch with the asset managers yourself and cut out the middle man by getting your hands on this list.

2. Do not rely on the bank for information.
Foreclosed properties are owned by banks, not people. As such, the law usually doesn't require the banks to disclose problems with the property to a new buyer. You get a great price, but you need to do all your own research. Do not rely on what the bank or its broker tells you - do your own homework.

3. Make sure you're actually getting a good price.
Whether through stupidity or greed, some brokers who work for banks price their properties incorrectly. Do not assume that, because a property is owned by a bank, it is a good deal. You need to compare the price to prices of other, similar properties in the area to ensure that you aren't taken to the cleaners by the bank's broker.

4. Hire a professional inspector.
Unless you are a very experienced contractor or handiman, you absolutely must hire a professional inspector to come with you to inspect the property before you buy. Anyone can spot an old bathroom or a lack of closets. But it usually takes an expert to detect foundation, roof, plumbing and electrical problems. Unfortunately, these are usually the most expensive problems to fix! So make sure you have someone along who really knows what to look for.

5. Meet any tenants.
The second you close on a property, the bank's tenants become your tenants. You want to meet them before you risk serious capital buying the building they live in. You want to know if they are reasonable, respectful people who will take care of your property. If they're not, you want to know if you will be able to get rid of them quickly and cheaply. If not, move on to the next property - it's not worth your time.

6. Get a lawyer to check the title.
Foreclosures can be very messy legal proceedings. As an investor, you want to be sure that you are buying clean, clear title to the properties you are investing in. Otherwise, you will have serious problems when you go to sell. The only way to be sure that title is ok is to have an experienced real estate lawyer review the preliminary title report generated for you by the title insurance company handling the transaction. It may seem like a big cost, but hiring a lawyer can help you avoid losing massive amounts of money buying unmarketable title to foreclosed properties.

With these tips in mind, you ought to be able to avoid the worst problems associated with buying foreclosed properties.