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Robosigning Mess Makes Foreclosures Risky But They Are Still A Great Deal

December 22nd, 2010

Purchasing a foreclosure house could be the deal of a lifetime. However, considering all the fuss about robosigning and fraudulent documents, homebuyers have to be more diligent.

The two areas that should not be overlooked when looking for a foreclosure are auctions and bank real estate owned properties (REOs). When looking at REOs be sure to deal with a real estate agent that knows the foreclosure market. There are fantastic bargains at auctions but you need to be very cautious.

The biggest risk when buying at auctions is getting a house that is in dreadful condition. Sure, you can make the repairs, but without seeing the house before bidding, you can’t be certain how much the repairs will cost. Therefore when buying at auctions you should always low ball the price, and always stay within your budget.

Your safest bet is to buy a REO. Many times when homeowners are forced to leave their homes they are obviously not very happy. Sometimes they sell whatever they can get their hands on. Some of the items include appliances, kitchen cabinets, light fixtures and bathroom fixtures. The outrageously anger might resort to destroying the house. They punch holes in walls, stain the carpeting and rip the sinks from the walls.

The banks will generally have all these defects repaired before listing the house for sale. The lawn is mowed and the hedges trimmed. Therefore when buying from the bank you might only be left with minor embellishments such as painting, steam cleaning the carpets and planting some scrubs.

The final step in purchasing your foreclosure house is the financing. If a lot of work is needed to make the house comfortable you need a mortgage that will cover both the purchase price of the house plus the repairs. There are two good options.

The 203(k) mortgage is insured by HUD. It will get you a better rate and will make getting the loan easier. The other option is HomePath mortgages which are backed by Fannie Mae.

Remember, do your homework. There are some good deals in the foreclosure market.

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Entry Filed under: foreclosure