There are four major ways by which to buy foreclosed property. This article provides a brief explanation of each. Due to the fact that foreclosure laws vary depending on the state you must consult a real estate lawyer for definitive information.

* Foreclosed home purchased by a bank is a good deal for you. However, the fact that the bank had to buy the property typically means that no one else would have 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 important to have any foreclosed property you purchase from a bank professionally inspected for structural flaws and other needed repairs, especially when the bank is selling a property as is. The good news about buying foreclosed property from a bank is that in most cases, the bank will have paid any outstanding debts on the property and you will be buying the property with 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.

* Only experienced property buyers should consider purchasing a foreclosed home through an auction. The entire purchase price must often be paid in an extremely short period, sometimes in cash. Also, sometimes it is not possible to check out 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. Debts which remain on the land after the debts that legally force the home into foreclosure are called junior liens. Right to redemption allows the previous owner to buy back the property within a specified time period so make sure to keep this in mind. The IRS has 120 days during which it is legally entitled to redeem any back taxes that may still be outstanding. Prior to purchasing foreclosed property, have a full title search done in addition to arranging any needed financing in advance of the auction.

* The final means by which you may buy foreclosed property is to purchase a house from the federal Housing and Urban Development, HUD. These are foreclosed properties, but the HUD pays a small percentage of the closing costs. In addition, most HUD houses that are approved for Federal Housing Administration mortgages are appraised. When purchasing a HUD property, you are required to do so through a broker or agent.