Most people have observed the listings for foreclosed properties and may have been wary of them. They do have negative connotations, but they can also present buyers with opportunities to buy a home at a bargain price. Read on to learn more about buying a home associated with foreclosure as a first-time home buyer.

Why Do Foreclosures Exist?

You might just naturally assume that a home is being foreclosed upon because they previous owners failed to pay the mortgage. That is one reason, but sometimes the property has failed to pay other bills. Contractors that perform work on the home but don't get paid can force foreclosure as well as homeowners' associations that don't get their dues. If the owners fail to pay their property taxes, the county tax assessors can take possession of the home as well. There are several different situations and times when you buyers can buy a foreclosed home.

Head the Foreclosure Off With an Offer

You might be able to keep third-party interests out of the process if you are financially able. If you know an owner is about to lose their home but legal steps have not yet been taken, you might be able to come to an agreement to buy the home from them. You would be preventing the homeowner from having a foreclosure on their credit record, which can make it difficult for them to buy another home. You should be able to pay off the mortgage and any liens on the property, however. If you have cash from the sale of a previous home, the situation can be ideal. If not, be sure you have financing at the ready.

If you go this route, be careful and:

1. Know the value of the home. Lenders won't approve a mortgage for more than the home is worth.

2. Have the property inspected. Homes can suffer from neglect when owners are financially strapped.

3. Research and understand all liens on the property. It's important to note that most liens are negotiable, and the lien-holders may be willing to make a deal in order to be paid quickly without having to pay the court costs associated with a foreclosure.

4. Use a real estate attorney to draw up your documents and to protect your interests.

Buy the Home Through an Auction

When owners lose their home to foreclosure, the bank often ends up auctioning the home off. Third-party real estate auctioneers are contracted to handle the sale of the home. Auctions are a somewhat risky way to buy a home. Take the following precautions when considering an auctioned home:

1. You may only have a matter of hours to close the deal, so ensure your financing is ready before you bid.

2. The home will likely be in poor condition. It may have sat empty for months, leaving it prey to vandals, termites and other pests, and thieves. Furthermore, the former owners may have stripped the home of vital components like heating and cooling, wiring, and more.

Speak with your real estate agent to learn more about taking advantage of the bargains offered by buying a foreclosed property.