Financial Requirements

• The finance company is not in the real estate market and considers foreclosed properties as a liability instead of an asset. Therefore, to ensure the property does not go through the foreclosure process a second time, the company often requires that you obtain a pre-qualification letter from your lender. You benefit from prequalifying as well, because you know exactly how much money the lender will finance for your real estate purchase and most of the financial paperwork is out of the way when you make an offer. If you are interested in a foreclosure short sale, you must find properties that are still in the foreclosure process instead of already on the market.
  
  

State Requirements

• Certain states offer homeowners who lost their properties to foreclosure the chance to reclaim the property within a certain amount of time, if they meet certain financial obligations. For instance, Alabama and Idaho have a one-year redemption period. Other states, like Florida and Georgia, have no redemption option and once the house is foreclosed, the previous owner relinquishes all rights. Before you purchase a foreclosed property, check with your real estate agent to determine the laws in your state. To protect yourself from lenders who illegally foreclosed on homeowners, purchase title insurance when you buy a foreclosed property. The title insurance protects you from forged documentation, hidden liens and other unknown problems. You have the peace of mind knowing you have clear title to your new home.
  
  

Local Requirements

• Your local government agency may require that you meet certain obligations prior to closing on a foreclosed property. For instance, it may be necessary to carry flood insurance on the property or your health and building inspectors may require a certificate of occupancy that guarantees the property is free from known health or structural hazards, such as black mold or termites. Your real estate agent can instruct you as to which authorities you must contact if an inspection is required. Your local real estate tax office also provides information on any second mortgages or construction liens the property may hold. Take advantage of your local judicial system to do a title search on the property you are interested in buying.
  
  

Owner's Obligations

• Before you purchase a foreclosed property, you must do your due diligence to determine if the purchase is a good investment. All foreclosed properties are sold as-is, which means there are no guarantees on the soundness of the structure, the working conditions of the heating system, plumbing or electricity. You have the right to hire an inspector to check for structural damage and other repairs that may be necessary to make the property livable. It is also your obligation to determine whether the property value will increase during the time you own the property or lose value as the real estate market decreases.