How To Find Great Deals On Foreclosed Homes
Foreclosed homes can be an opportunity to acquire a house at an exceptionally low price. Lots of people are out to take advantage of that chance, of course, so you'll have to be well-informed and decisive to exploit the opportunity!
Immediately following the housing bubble bust in 2008, the U.S. foreclosure market exploded. Between 2006 and 2010, the market tripled, jumping from 717,522 in 2006 to 2,871,891 in 2010.
Numerous buyers jumped into the scene, including companies that specialized in acquiring and rehabilitating these properties to resell or rent them. As of 2016, the market has dropped down to a more reasonable level, below the levels reached in 2007, though still slightly above 2006.
What does this market mean for buyers? Deals are still out there, especially if you're looking in the right state. Competition for those properties is steep, and large-scale buyers have many advantages in getting to the best deals first. Nevertheless, buying a foreclosed property for the right price is still possible, and it can still get you a great deal. Whether you're looking to purchase for a possible flip to turn it into a rental or investment property, or to make it your residence, the market is not as crowded as it was, but it's still strong.
If you want to maximize your buying power in today's market, you'll need the right tools to find and assess the best deals on the market. There are a good number of websites and apps that help provide you with the tools you'll need. Below, we've provided a breakdown on some of the "best in class" tools you'll need to land your deal.
Best Websites and Apps
- Most other real estate websites, such as Zillow and Trulia, use listings directly from MLS. This site allows users to conduct simple database searches by city and state, county and state, or by zip code. Users can filter by type based on confirmed foreclosures, pre-foreclosures, bankruptcies, rent to own, sheriff sales and deals. Filtering also works on the property type (such as single family or multi-family).
Information available includes property classifications such as notices of sale, auction information, tax information, legal information (trustee or attorney name and contact numbers) and date when the property was listed. Users can also find basic information such as size, plot size, date of construction and general features.
MLS requires a paid account to access most of the information. However, those looking for listings available on other websites may have an advantage over those who use third parties, as MLS lists these first before the other sites pick them up.
- Zillow is one of the best websites around for research. Zillow offers a very detailed search tool that allows you to search by city, state, zip code, and even by a particular street address. You can filter specifically for foreclosures in a regular search, or you can use Zillow's specific page. Zillow draws listings directly from MLS as well as listings published by individuals on their website.
Unique to Zillow is its listing of both actual and potential foreclosures. This listing contains properties that are in pre-foreclosure and other bank-owned properties that are not currently available on the market but may be, soon.
Zillow allows users to review the history of each home including its construction year, property size, when the home was listed, how many others have viewed the home, features, and an extensive buying and selling history. An individual information section tells you whether the home is in default, auction information (including sale date), the type of foreclosure and the trustee or attorney's name and contact information.
Zillow also uses a large set of data proprietary to create a "Zestimate" price, which is an estimated value. In some cases, potential buyers can use the Zestimate to determine whether the home is over or undervalued.
- Trulia offers a comprehensive listing of foreclosures. The site allows users to search by geographic location using your computer's registered location to show you the homes in your city, although you can do an individual search by city, state or zip code. Each listing includes the type, whether it's at auction and whether there has been a notice of default. For homes that do not show a price, Trulia provides the means to contact the important sources for more information.
When looking into the details for each home, users will find a section specifically for foreclosures. This section provides information on the status of loans and the previous sale price for the home. Legal details are also available, including notices of sale and the trustee or attorney name and contact information.
Price History and trends for the area are also offered, as are crime rates and reported offenses in the area around the home.
- RealtyTrac provides a paid service to search for foreclosures anywhere in the country. RealtyTrac has a data and visual-heavy focus, with a good number of charts, graphs, and visuals to help better inform users on the market in their area and around the country. Users can search specifically for foreclosures, pre-foreclosures, auctions and bank-owned properties.
Users can search for each type of property by state. RealtyTrac provides statistics on that state's market, as well as visual data on which counties contain the highest concentration of foreclosures in each state. Hovering over any state on their interactive map reveals availability in each state or country, as well as how many properties are for sale overall.
Full listings show the way the property is selling (bank auction, for example) as well as where that auction is taking place. Auctions occurring on specific websites have that site listed. Selecting a particular property shows a far more detailed list of information. They cover legal information about the property, area crime rates, estimated opening bids for the auction. They also indicate whether the action is public or private, release information about current equity and loan-to-value ratio, the potential profit a buyer can make after a flip, open loans, buying and selling history, filed building permits, comparable listings and general information such as age and features.
RealtyTrac offers a free trial, but to maximize the benefit of this site, users will have to purchase a subscription to the service.
: Android and iOS
: The same search features and detailed information on the website in a mobile-friendly design.
: Auctions.Com Real Estate
: Android and iOS
: Allows users to filter by city, state and zip code. The app provides detailed information about house auctions, including due diligence documents and broker information. Allows users to save properties and register to bid directly from the app.
: Android and iOS
: This app offers the same benefits as the Trulia website, with a more mobile-friendly layout.
Checklist for Buying
Buying a foreclosure can be a long and risky venture. The key is research and due diligence. Here are a few needed tips to help stay afloat.
Educate yourself about the market
. Is it a buyer's market or a seller's market? How many foreclosures are there in the area you're looking to buy? What are the comparable prices in the local, state and national market? Find a good realtor who may be able to teach you how the market works.
Make sure you have the money going into the process
. If you're paying with cash, make sure you have enough to cover the cost of the purchase and any hidden costs based on the expenses associated with buying a foreclosure. If you're seeking a mortgage, you may need to get a larger loan than anticipated. Foreclosures are purchased as-is, so you may need to get someone to assess the damage before you get your loan, as those hidden problems could quickly exceed the value of a loan obtained without information on the home's condition. Cash is best. That can include cash obtained through a mortgage loan, but note: a line of credit is not a loan. You'll need to prove you have cash on hand.
Understand whether the auction is public or private
. Avoid investing time only to discover that the auction is private. Make sure to check its "for sale" status before doing any other research. If you can't buy it, there's no point in continuing.
Check for liens in place
. If there are IRS liens or any other liens on the house, you will take responsibility for them once you purchase. It's best to avoid these if you can. If you believe the lien is worth the purchase, make sure you understand the responsibilities you incur when it comes to paying on the lien.
Check the current equity and loan-to-value status
. When a home goes into foreclosure, this means the current owner failed to pay the mortgage. By purchasing it, you'll take on what portion of the house is still owned by the bank. Some properties may have a good amount of equity, meaning you may own more of it if you adopt the original loan.
Investigate the house yourself
. You need to go to the property you want to purchase and look at it. Make sure the home is not occupied when you do this. Check the exterior of the building, and if the windows are unlocked, look in the windows to see the interior of the house. If the doors are unlocked, you may enter. If they're locked, do not try to enter forcibly as this is considered "Breaking and Entering."
Due diligence is your most important step
. What this means is making sure you research everything about the home before you try to buy it. That means investigating the home's history where possible, any public documents available, selling history, repair history, and information on the current equity status.
All of these procedures may sound like a lot of work, and they are. At the end of all that work, though, comes the possibility of buying a home at a fraction of the price you'd pay on the average market. If that sounds appealing to you, do your homework and get to work!