Buyers and investors alike often assume that any house being sold as a foreclosure is going to be a great deal. The media makes it sound like banks are desperate to sell and will take pennies on the dollar just to move a foreclosure property. But the fact is, that banks are not that worried about selling and some foreclosure properties are not a good investment even though they might appear to be selling for far below the value of other homes in the area. You need to understand the foreclosure market and what it will really cost you to purchase a foreclosure home.
If you are looking at a listing and see that the bank is asking much less than the previous sale price, you need to consider the date of the last sale and the current market. A bank will sell a home for what is owed on it and what is current market value. It is not concerned with what the last sale value was. In most cases, the home was sold in the housing boom when prices were artificially inflated and now that the bubble has burst, the current market value is more realistic. With that being said, you now see that not every foreclosure will be that very affordable hidden gem and that you will need to look at more obscure methods of finding bargain properties. The MLS is not going to be your best resource for a deal.
Most banks will contact a real estate professional to assist them in determining the asking price for a foreclosed property. If you are very fortunate, you will find a realtor who regularly works with a lender and has knowledge of the local foreclosure market and can advise you on the better deals. If you are unable to find a realtor who deals in foreclosures then you might consider checking out the trustee or sheriffs home auctions. At these auctions, you will be expected to pay cash for the property and purchase it in as is condition. In addition, if you purchase a property with additional liens such as back taxes or HOA dues, you become responsible for those fees. There are also private auctions which place ads in the newspapers and online. In some cases, you will be able to inspect the properties prior to the auction but the terms and rules for each event differ according to what the auctioneer determines.
In some cases you can also go directly to a lender and purchase from them. Often times, you can get a better deal if you are prepared to purchase multiple properties from a lender at one time. Some lenders like to eliminate inventory this way while others would prefer to sell at auction to try to increase the sale prices. Establishing a relationship with a lender who is willing to sell to you is a great way to have a long term supply of affordable foreclosure properties to select from. You can also visit www.azrealestatewholesale.com to learn about the resources and properties that they have to offer you. Working with a foreclosure specialists will provide you with a great opportunity to learn the industry and the process as you make your first purchases.