Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

3 tips on buying a foreclosed home

Sure, banks are anxious to sell foreclosed properties and you can get a decent price. Here's what you need to know before you shop.

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Stephen Gandel, Money Magazine senior writer

Mortgage Rates
30 yr fixed 3.92%
15 yr fixed 2.99%
5/1 ARM 3.26%
30 yr refi 4.01%
15 yr refi 3.08%

Find personalized rates:

Rates provided by Bankrate.com.

(Money Magazine) -- Meet the latest desperate home seller: the bank. According to RealtyTrac, lenders repossessed 197,800 homes in the first four months of 2008 vs. 90,800 in that period last year.

Banks don't want to be in the real estate business, so sometimes they'll accept much less than you might think to get the darn things off their books - especially in markets having lots of trouble. But buying such properties has drawbacks.

Here's what you need to know.

1. Use the Web

Websites can help you find foreclosed homes. On Redfin.com, you can do a free search for so-called real estate owned (REO) properties - those for which the bank holds the deed - in Baltimore, Boston, Los Angeles, San Diego, San Francisco, Seattle and Washington, D.C. (and soon, Chicago).

Or you can locate them nationwide on Foreclosures.com or RealtyTrac.com for a subscription fee of $49.95 a month.

2. Use a broker

Forget buying directly from the bank (lenders typically deal only with pros) or at auction (you may wind up bidding more than you should).

Work with brokers; banks use them to sell most homes. Once you've identified which properties are REO, you'll know those are the ones for which a low-ball offer is more likely to be accepted.

3. Watch out for repair costs

Look for houses that have been on the market for more than 90 days and offer

Bank-owned houses typically need a lot of work: People facing foreclosure often neglect maintenance and may have swiped fixtures and appliances on their way out.

Never buy an REO property without an inspection, and be sure to factor repair and remodeling work into your offering price. According to a recent survey by Remodeling Online, replacing a bathroom alone costs nearly $16,000, on average.  To top of page

Send feedback to Money Magazine
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
Black Friday 2015 in pictures Shoppers around the country braved the crowds to get their hands on the best Black Friday deals. More
Driving the ultimate in '50s Mercedes-Benz style The SC was the car that re-introduced Mercedes-Benz as a global luxury car icon. More
Driving the world's first car Driving a replica of the 1886 Benz Patent Motorwagen, the first internal combustion automobile. More