Finance

We need a bigger house. Is it worth looking into foreclosures?

Maybe, but you’ll need to be savvy about it. Adopt the same strategy as a Wall Street insider: Make your move before the investment—in this case, the property—goes public. Foreclosures rose 42 percent last year to more than a million nationwide, according to realtytrac.com, a real estate data tracking site. And unlike a traditional foreclosure market, this one is happening across all income levels. “Buyers who were hoping for big appreciation are just throwing in the towel,” says Ryan Slack, CEO of data clearinghouse PropertyShark.com. Their loss can be your gain:

Start your hunt online. Both realtytrac.com and foreclosure.com list more than 800,000 foreclosed homes nationwide. Compile a short list of properties that interest you.

Strike preemptively. Most foreclosures are sold at auction, but the best ones are bought in lis pendens (i.e., lawsuit pending). This window lasts up to a year, allowing you time to negotiate with the owners (rather than their bank). “View the house before making an offer,” says Andy Heller, author of Buy Even Lower: The Regular People’s Guide to Real Estate Riches. “Owners tend to underestimate the number and cost of repairs.”

Master the auction. If you must attend an auction, scout the property beforehand to get a sense of what shape it’s in. Search for tax liens against it at propertyshark.com. Find out what similar homes are selling for at homegain.com. And, if you win the bidding, be prepared to pay the deposit, which can range from 10 percent (in New York) to the full price of the house (in Illinois). “But if you do your due diligence, you can get 30 percent below the going market rate,” says Slack.

Want the best advice for your most pressing concerns?

Write to bestadvice@rodale.com

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