How to Buy a Foreclosed Property

The condition of foreclosed homes vary between properties, but most need at least mild to moderate repairs.
The condition of foreclosed homes vary between properties, but most need at least mild to moderate repairs.

Homes at half price? While it may sound too good to be true, a sharp increase in the number of foreclosures means that there's never been a better time to score some serious bargains on real estate. Even better, the sheer volume of foreclosed homes on the market means that you're sure to find a property that's just right for you, whether you want a house that's move-in ready or a fixer-upper you can put your own spin on.

Worried that buying a foreclosure is only an option for investors or wealthy buyers who can afford to pay cash? The truth may surprise you! With foreclosed properties making up more than half of all home sales in some states, there are plenty of resources to help you find and pay for the perfect property, even if you know nothing about real estate.

When homeowners fail to make mortgage payments, the bank or lender may take over ownership of the property in a process known as foreclosure. Once the homeowner has been evicted, however, the lender is fully responsible for all costs associated with the home, including maintenance, taxes, heating and countless other expenses. Instead of holding on to a foreclosure and shelling out big bucks to maintain an empty house, many lenders place the property back on the market, often at a deep discount.

Because the banks are usually eager to sell, foreclosures represent an excellent opportunity for buyers and investors looking to purchase homes at reduced prices. In 2011, the average foreclosed property sold at 28 percent below its list price, and some savvy buyers saved 50 percent or more. Of course, even though foreclosures are often inexpensive when compared to new homes, they aren't a good choice for everyone. Many require special considerations in terms of financing, and most foreclosed homes are sold as is, which can lead to big headaches for buyers who are unprepared for the reality of these types of properties. Above all, foreclosures require plenty of patience, as the buying process can be much more time-consuming and complex than a standard property purchase.

So, how much can you really save by buying a foreclosed home? Of course, prices vary by state, area and community, but according to CNN, in 2011, the average conventional, non-foreclosed property in the U.S. sold for $259,000. The average bank-owned foreclosure, on the other hand, sold for $190,000. Distressed foreclosures that required significant work or renovation averaged $99,000.

Still think you might be interested in buying a foreclosure? Read on to learn the best way to locate foreclosed properties in your area.