Here we go again! The feeding frenzy around foreclosures is heating up to a fever pitch. There’s a general belief that if you buy a foreclosure property, it’s a good deal. Be Careful! It may be the worst thing you could do. Generally, a property goes into foreclosure because the owner was “upside down” in the property. That is, they owed more than the property was worth in the open market, considering the loan amount and the costs of getting the property sold. So, they let it go to back to the lender.

Foreclosures often occur in a soft market that can follow the rapid appreciation the nation experienced from 2002 to early 2006, and then the market hit the skids. Rates went up, and the steam went out of the speculation market, and those who bought at the top are caught holding the bag. Many of these are lenders who did just about anything to book a loan during this period. They want out of those properties, but not at any price. Their goal is to recapture as much of their investment as possible.

Before you buy a foreclosure, you need to research what’s going on in the area, not just the value of the property you’re considering. If foreclosure activity is up, flipping is up and the trend is volatile, you could be buying trouble if you don’t do your research. So, analyze everything you can about that local market. Check out the history of the property. Has it been recently foreclosed? If so, there could be underlying problems with a property that has been cosmetically repaired. The old adages “look before you leap” and “if it sounds to good to be true, it probably is too good to be true” come immediately to mind. So, watch your step and do your homework.