Stalking the Elusive Foreclosure Deal; Bargains are Few, Obstacles are Many

Many buyers who hope to get a steal, or at least a deal, look at homes being sold by lenders who took possession after a foreclosure.
But bargain-hunters need to know that buying foreclosures—also called REOs, for “real estate owned” by a lender—can be different from buying other homes. The homes are frequently in bad shape, needing tens of thousands of dollars in renovations. They’re most often found in urban areas and are much less common in more desirable towns. And banks aren’t very patient—buyers must be ready to jump when they find the right property. Finally, while the price can be a real bargain, other times the discount isn’t very large.

Most bank-owned properties are not in great shape. At the very least, they’ve likely been neglected by despairing homeowners who knew they were going to lose the homes. At worst, they’ve been vandalized by frustrated homeowners who punch holes in walls and rip out kitchen cabinets and plumbing. If an inspection turns up trouble, the banks generally don’t want to hear about it. That’s the buyer’s problem.
Most bank-owned properties are listed by real estate agents and placed on the multiple listing service. Other buyers work with real estate agents specializing in bank-owned properties.
Banks have websites that list their properties for sale, along with the name of the listing agent the bank uses. To find such listings, buyers can plug a bank or mortgage lender name into a search engine, along with the word “foreclosure.”
When these properties are priced well, buyers may find there’s a lot of competition.