ATLANTA,None — Foreclosures make up a huge chunk of the housing market. Nationally, about a quarter of houses sold right now are foreclosures. And despite the foreclosure mess unfolding recently, Channel 2 Consumer Adviser Clark Howard says buying a foreclosure is a deal, if you avoid the traps.
Here are Clark's rules for buying a foreclosure:
First, do not buy a foreclosure on the courthouse steps. If the property doesn't sell there, it reverts to the bank that serviced the loan. Then the bank puts it up for sale. It's called an REO property, which stands for real estate owned.
When buying an REO home, there is one thing Clark always does: He gets an owner's title insurance policy. Do not confuse it with regular title insurance. That policy protects the lender, not the buyer. If there's a problem with the title later and you don't get an owners title insurance policy, you will be out of luck.
Also, when writing a contract to buy an REO there are several requirements that can be put into a contract. Clark advises having an inspection, getting a finance contingency and also a termite letter.