Foreclosure Buyers Beware: Don’t Buy at Auctions

Foreclosure rates are at an all-time high and many real estate investors are using this an opportunity to buy properties at bargain pricing. While buying low and selling at a point in the future for a higher price can be a reality, it's not something the novice real estate investor should necessarily consider. If you're an uneducated buyer, foreclosure properties can become a money pit and eventually wind up damaging your credit and your finances.

Unless you're a huge risk-taker, don't buy foreclosure properties at auctions. Foreclosure properties that are auctioned off to the highest bidder may come with liens and other legal headaches that make it less of a money maker and more of a trauma. If you're considering the purchase of a foreclosure, then buy directly from the bank holding the foreclosure instead.

Also, get financing for the purchase of the property before you start your shopping expedition. Many mortgage lenders offer mortgage pre-qualification, where you're pre-approved for a mortgage without having a specific property in mind. This can be a bargaining tool with the bank or it can put you at the head of the list over other buyers that do not have their financing in order.