What do I look for when buying a foreclosure?

Not all foreclosures are GOOD DEALS. You need to know the area or have an agent who knows the area you are looking in. What is your goal that you are looking to achieve? In other words if you are looking for investment property it may be cost divided by return rate, where if you are looking for yourself other factors may come into play...fixer upper? turn key dream home? With that said you also need to be VERY Competitive with all the other clients who are looking for foreclosure, you need an agent who will look at the new foreclosure list everyday and SIFTED through them to find what you are looking for and aggressively pursue that listing for you.
  • March 10 2011 - Scottsdale
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Answers (8)

Profile picture for Scottsdale AZ
This person needs to review Zillow terms of use.
  • April 26 2011
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Look out for back taxes, mechanic's liens, tax liens, undisclosed hazards/deficiencies, etc.  Be thorough in both you personal and contracted inspections.  The bank will disclose little to nothing.
  • March 11 2011
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Debra that's a great idea. On days when I'm not too busy with showings/closings etc., I try to find time to answer two or three questions on Zillow. These "blog" question/answer posts, along with all the "my property is listed wrong on Zillow" posts, make it difficult to wade through to find real non-agent questions. An agent blog section is an interesting idea - there may be many consumers out there eager to digest articles written by agents.
  • March 11 2011
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I don't understand, you are a Realtor?  Do you need help with REO's?  Seems like you understand them as you answered your own question.  I would recommend to any person who is not an agent or Realtor to work with an agent or Realtor when considering a REO and I would recommend using one that has experience putting in offers and closing them. 
  • March 11 2011
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Profile picture for Blue Nile
Well, the reason Zillow has a question and answer forum, is so that the Realtors® posting questions because they are "new to the site" and paid lots of money to get a "premier" status by buying a Zip-Code or similar, and thus have absolutely no clue of the answer to their question, can get the "right" answer from the CONSUMERS!

You see, agents don't have the answers, so they ask.  And the consumers have the answers, so the consumers have to "enlighten" these agents.

So, Terri, first you need to know the difference between a Foreclosure that is going to auction, and an REO that is being sold by the financial institution after being bought back at the auction.

Second, you need to learn about "price to rent" ratio, and how to look up rents in the ares.

Third, you need to know comps in the area and rents in the area.  Zillow can help with that, especially now that Zillow as a RENT Zestimate.   You can use the home search pages to find recently sold that are comparable, and you can use the RENT Zestimate for comparison.

Forth, you need to know the market trends for the area and the price range and type of property.  Zillow's "Local info" pages are a tremendous help with that.  The link is at the top of the page.

Fifth, you need to know that if you go to the auction, you will need to bring cash or equivalent.  You will not be able to buy on credit at a Foreclosure auction.  You need to know market value and what you will pay ahead of time.

Sixth, if you are buying a REO, you need to know how the financial institution is pricing it, and have some clue how long it will remain in escrow, if your offer is even considered at all.  And you need to know that most REO's play favorites to cash offers or offers with pre-approval letters from their institution.

Seventh, you need to know that most agents are not very experienced with construction nor building codes, and that they have no obligation to tell you anything they "don't know".  So, before even making an offer, you need to be looking at all the items that your experienced inspector typically would and make price adjustments for all the conditions requiring correction.

Eighth, you need to know that a loan funding contingency is critical, and that most lenders will not fund a loan if the property doesn't appraise sufficiently high to cover your offer amount and the lender's risk.

Ninth, you need to know that there are thousands more of these foreclosures coming with prices still dropping, so there is no reason to pay too much just because someone else is willing to.
  • March 10 2011
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A foreclosure is typically a better deal than a short sale.  I think it is better to buy a foreclosed home than one that is going into foreclosure.  The banks are such a pain to work with and you never know what they are going to pull at the last minute.
  • March 10 2011
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No one needs to respond to this - the OP already did!

I just don't understand the point of asking and answering your own "question". Why not just write a blog if you want to be informative?..........or is this the way one gets around the fact that zillow doesn't have a blog section?
  • March 10 2011
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Oh but another question that is asked and answered.

We really should do away with consumers on this site. Clearly their input is superfluous and unnecessary when we can get agents to both ask AND answer questions. 
  • March 10 2011
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