Buying Foreclosures - Part 2

Posted at 3:53 AM, Feb. 26, 2007

Since foreclosed homes that go to the auction block cannot be inspected prior to sale and there is no admonition or disclosure by the auctioneer as to any hidden debt, the investor can mitigate the anxiety about taking this type of risk by performing as much due diligence as possible. 

This means checking courthouse records for evidence of any other liens,and finding out how much equity there is in the property.  It would also serve you well to drive by the property to perform an inspection of the exterior.  CAUTION:  You may encounter the homeowner who may be none too happy to see you and  you could be considered to be trespassing.  Do this at your own risk.

If you do make a visit to the property, when looking at the exterior, look for signs of roof damage or aging shingles, look at the siding, gutters, soffits, and the heat pump/compressor or oil tank., observe for overgrown grass, weeds, and general neglect.   These are all signs and indicators of problems that could possibly exist inside the home as well.  Since homeowners facing foreclosure are usually preserving all their cash just to make the mortgage payment, you will often find examples of this kind of deferred maintenance. Estimate what you think it would cost to replace the HVAC, roof, plumbing, etc. and then factor that into your decision to make an offer at the auction.