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With foreclosures rife, it may seem like a no-brainer way to score a good price on an available house. But buying a foreclosure requires lots of homework, patience and good timing. Kiplinger's has some of the best advice I've seen on how to buy a foreclosure. Top of the list is to find a real estate agent who deals often with foreclosures, so you can get a true picture of market values of homes. Traditional financing rules and timelines don't apply when it comes to foreclosures, so it can be a bumpy road to home ownership, though worth it in the end.
Kiplinger's notes there are three ways to buy a foreclosure:
1. Presale -- You negotiate with the homeowners directly before the home goes into foreclosure. This is the riskiest way because deals often fall through and title problems arise, Kiplinger says.
2. Auction -- The most common way to buy a foreclosed home, you can expect a 10 percent to 25 percent discount off regular market prices. You've got to be an adventurous soul for this since you often cannot inspect the inside of the home before bidding.
3. Directly from banks -- Homes that don't sell in presales or auctions end up with banks, which often set sale prices near market values. That's why you'll need a real estate agent knowledgeable in the foreclosure market to help negotiate the best deal.
For first-time homebuyers, Get Rich Slowly has 11 tips worth considering. The really nice thing for first-time homebuyers is, as #6 on the list says, you can take your time and do your homework, researching locations, learning the market you want to buy in, and setting a realistic budget. We're seeing how destructive it is for everyone when homeowners take on mortgages they cannot afford. So check out the 11 pointers and let us know if you have any to add.
