Buying a foreclosure requires time and money

By Sari R. Updated on 4/8/2013

In the past year or so, investors have been flooding the housing market with the intent of flipping foreclosed properties into income-generating rental units.  Despite the fact that the demand for these homes is increasing, lenders have been listing there properties slowly.  This has led to a series of bidding wars and higher prices, making buying a foreclosure is a lot harder than it used to be. The recent trend is that foreclosures are listed for much less than what they are worth – a strategy with the intent of getting more than one bid.   

Despite all this, there are still many foreclosed properties in existence.  Homebuyers just need to search for the correct property and act quickly once they find one that meets their needs.  Competition was fierce a year ago as well, but realtors say that this year’s foreclosure market is very, very different.  The properties look better than ever, due to Fannie Mae and Freddie Mac’s interest in preserving neighborhoods.  These properties are offered to owner-occupants before being offered to investors. 

Some government-owned houses are also being renovated by the GSEs in an effort to be more marketable.  Such renovations have included: new carpeting, new appliances or a new paint job.  This is a direct effort to market houses to owner-occupants instead of investors.  A remodeled foreclosure is much more expensive than one with a repair task-list but doesn’t have a problem securing financing when compared to other houses that are not quite in livable condition.

The FHA’s 203(k) mortgage financing program helps buyers who want to be a property that is in need of major renovations or remodeling.  This program requires a lot of paperwork, so it’s beneficial to deal with real estate agents who are familiar with this program. 

Potential homebuyers shouldn’t avoid the foreclosure market despite the fierce competition and work involved.  Homebuyers should instead focus on the area in which they are looking; foreclosed homes in one area versus another might differ greatly in habitable conditions.  It’s still a buyer’s market, so homebuyers should search for a property that meets all of their needs.