Tips on buying a foreclosed home

It's easy to think that buying foreclosures is a sure path to riches, but from what I've heard, only those who specialize in the process of buying/fixing/flipping can earn money, and even then return can be dubious. But for others looking for a long-term hold, deals do abound, but before jumping in, carefully consider the following 5 tips from a Money magazine story:

1. Finding one has become easier

You don't need to show up at courthouse auctions or comb through legal filings. These days many banks sell foreclosed homes through real estate agents...

2. It's best to buy from a bank

If you buy a foreclosed home at an auction before the bank repossesses it, you'll have to pay in cash, and you usually cannot inspect the property. You may also later discover that there are liens against it...

3. Bring in a contractor before you buy

Many foreclosed homes have been abandoned, some even vandalized, and they often require major repairs...

4. Bid low

Banks aren't necessarily selling foreclosures at fire-sale prices; some are listed at market value, says Gene Hacker, a broker in Orange County, Calif. So be prepared to haggle. The bigger the inventory of foreclosed homes the bank has and the longer the property has sat, the greater your chances of nabbing a great deal, says Chris Matty of ForeclosurePoint.com..

5. Be prepared to wait

While some lenders are getting back to bidders within 36 hours, others are dealing with an enormous backlog that can hold up their response for as long as three months...

David Lereah's lame mea culpa

Remember the ridiculously bullish David Lereah, Chief Economist for the National Association of Realtors, who penned books urging people to buy homes because nothing bad would ever happen to the real estate market? Money magazine has a brief interview with Lereah, in which he defends his tenure with the NAR by mostly pointing to his need for remaining employed. From a CNNMoney.com story:

Q. Were you wrong to be so bullish?

A. I worked for an association promoting housing, and it was my job to represent their interests. If you look at my actual forecasts, the numbers were right in line with most forecasts. The difference was that I put a positive spin on it. It was easy to do during boom times, harder when times weren't good. I never thought the whole national real estate market would burst.

Q. The NAR's latest forecast calls for a slight increase in home prices next year. Thoughts?

A. My views are quite different now. I'm pretty bearish and have been for the past year and a half. Home prices will continue to drop. I think we'll see a very modest recovery in sales activity in 2009. But we've still got excess inventories, a bad economy and a credit crunch that will push prices down further, another 5% to 10% more. It'll take a long time to get back to the peak prices we saw in many markets.

Q. Any regrets?

A. I would not have done anything different. But I was a public spokesman writing about housing having a good future. I was wrong. I have to take responsibility for that.