Foreclosed properties are homes that the buyer could no longer complete the terms of their mortgage. The lender took back the home, which was collateral on the loan, and is now selling it. So, instead of dealing with a homeowner who is selling, you will work with the bank as the seller.
Because these homes are not your typical for sale by owner properties, it can introduce some issues.
Bob Villa explains one of the main issues with a foreclosed property is that they sell as-is, which means the bank will not make repairs to anything. Because of this, you must do your due diligence when checking it out. You want to get a complete inspection to look for every possible issue so that you know exactly what you are getting.
Some foreclosed properties will have additional financial entanglements other than the unpaid mortgage. You should always do a complete check on the background to ensure there are not any unpaid taxes or other liens on the property. You will typically be responsible for these things if you buy the home, so you will want to factor that into your final cost.
The good thing about a foreclosed property is the bank does not want it. They just want the money it is worth. So, you have a lot of room for negotiations. This is especially helpful if you find a serious issue with the home. You can often get the price down quite a bit if you are good at pleading your case and the market is not working against you.