Knowing how to buy a foreclosure home is important if you want to get really into the real estate market. It is not the same as going through the ordinary process of house purchase.

In order to know how to buy a foreclosure home, you first need to know what type of property you are looking for. The term "foreclosure home" is actually a vague one covering properties in various situations, or various stages of the foreclosure process.

• Pre-foreclosure homes. Pre-foreclosure homes are properties on which a notice of default has been served, but which have not yet gone to foreclosure auction. During this period, the owner still has the right to dispose of the house and is often desperate to do so. You can find these by looking for notices of default or of impending foreclosures in public records offices. There is nothing to stop you from contacting the owner yourself and making an offer to buy the property. Find out how much is owing on the property and estimate what the cost of essential repairs, outstanding taxes and liens etc. will be, in order to calculate the net equity in the property. Your best chance of a profitable deal is to make an offer of 50 percent of the net equity, "subject to" the existing finance remaining in place. Remind the owners that once the property goes to foreclosure sale, they will get nothing - so it's a win-win deal on both sides.


• Properties at foreclosure auctions. This is where you will find the most competition, from all sorts of people including seasoned foreclosure investors. It is also risky as you have no opportunity to inspect the property. Make sure you have your finances in place before you place a bid. If you make the winning bid, you will have to pay the full amount by cashier's check at the end of the auction - so don't get carried away. And don't expect to use your credit card - you won't be able to.


• HUD homes in foreclosure. A HUD home is a property that has been acquired by the US Department of Housing and Urban Development (HUD), as a result of the owners defaulting on a mortgage that was insured by the Federal Housing Administration (FDA). The homes are initially offered to buyers who will live in them for at least a year, so it's a good opportunity if you're a first-time home buyer. If such a buyer can't be found, the sale is opened up to anyone including investors and "flippers". You can place a bid by working with a HUD-approved real estate agent, as long as you submit a deposit with your bid. The houses sell quickly and settlement often takes place within weeks - so again, you need to secure your finance in advance. The thing to remember is that the homes have no warranty and are sold "as is". So it is essential to have a thorough inspection carried out before you place your bid.


• REO homes. If a property fails to sell at a foreclosure auction, its title passes to the foreclosing lender. It is then known as as REO (real estate owned) property. The bank will ensure any occupants are evicted and then place the house on the market. If you want to get in quickly with one of these, a technique which has been known to work is to identify your property at the auction and photograph it, then immediately send a FedEx overnight letter to the headquarters of the lending bank, enclosing a deposit check and offering to buy the house. If the house is in bad condition, use the photograph to point out how bad it looks. This is not guaranteed to work, but it often results in the bank accepting your offer or at least making a counter-offer. As lenders are not landlords or realtors, they usually want to get the property off their hands as quickly as possible.


• Abandoned homes - tax foreclosures. Sometimes the owners of a property will abandon it when they know foreclosure is imminent. Once a property is deemed to be abandoned, it will be sold by the municipality or town in order to try to recover the taxes owed. This can potentially be a very profitable investment, but it is essential to carry out a thorough title search and to check whether there are liens or other debts outstanding.

The question of how to buy a foreclosure home depends on what stage of foreclosure the property is at. The transaction can potentially be a profitable one, but it is essential to go about it the right way so as not to lose your money.

If you would like to know how you can find foreclosure homes at all stages and in all parts of the country, come and visit http://www.bizwrite.co.uk/realestate/foreclosures.html

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