There are four major ways by which to buy foreclosed property. This article provides a brief explanation of each. Please consult a real estate lawyer for more authoritative information, especially since foreclosure laws vary from state to state.

* Foreclosed home purchased by a bank is a good deal for you. The fact that the bank had to buy the property typically means that no one else wanted it. Of course, one reason could be that people are not into buying these days, but another reason could be that the property is in need of expensive repairs. It is always necessary to check for flaws when buying a foreclosed property. Any advantage to purchasing foreclosed property from a bank is that most times they will have settled outstanding debts and so your purchase will be for property having a clear title.

* Once a home is in foreclosure, it benefits both a buyer and homeowner to work out a private sale prior to the auction date. If equity is in the house, a sum is to be paid to the owner. Always remember that the current owner may choose to inform you or not about existing debts on the property. Check this out yourself. If you find out there are current liens, get a hold of the holders of the liens and find out whether they will agree to settle with you, at a discount. Again, check the house for repairs that are need. Subtract from the property’s fair market value all costs including the home owner’s payoff, any liens on the property, as well as necessary repairs. If the costs are equal to or under the fair market value and you come to an agreement with the homeowner, have a real estate lawyer draw up the purchase agreement.

* Buying at foreclosed property at a foreclosure auction is only recommended if you are an experienced property buyer. The entire purchase price must often be paid in an extremely short period, sometimes in cash. Also, it is often not possible to inspect the property. You need to be aware of all outstanding debts and liens on the property because, as the new owner, you’ll be responsible for them. Junior liens are defined as debts which exist in the property subsequent to those debts that caused the home to foreclose. All foreclosed properties offer the original owner the “right of redemption” which allows them the opportunity to purchase their home back within a set time frame. If there are back taxes owed on the property, the IRS has 120 days during which it is legally entitled to redeem it. One should obtain a complete title search and set up the financing needed prior to attending the auction before buying foreclosed property.

* The final means by which you may buy foreclosed property is to purchase a house from the federal Housing and Urban Development, HUD. Even though these properties are foreclosed the HUD still pays a small percentage of any associated closing costs. Also, the majority of HUD homes which have received approval for mortgages by the Federal Housing Administration have been appraised. However, to purchase HUD property you must go through a HUD broker or agent.