The number of foreclosures hitting the housing market continues to grow each day and smart investors and buyers with cash on hand and solid credit are taking advantage of the enormous opportunities becoming available.  One of the best ways to ensure that you are making a sound investment is to get a home inspection before signing any papers or closing any deals.

Most of the properties available on the market are pre-foreclosures or short sales, foreclosures, or post-foreclosures, also known as REO or Real Estate Owned Properties.  There are advantages and disadvantages to purchasing a home during these different stages of the foreclosure process and the value of a home inspection before purchase is one of the major differentiating factors.  As all properties in the foreclosure stages are being sold in “as-is” condition, a proper home inspection can mean the difference between a sound investment and an adventure in a money pit. 

With short sales, you are working with the property owner and their lender to work out a deal that will be accepted by all three parties.  Homes sold during pre-foreclosure are usually still sold at or below market value, making them a value for the buyer.  The arrangements of the short sale also save lenders the cost of processing a house through foreclosure and it can help to “save” the credit of the previous owners.  However, one of the greatest benefits of purchasing during the pre-foreclosure stage is the access you can gain to the property and its history.  In short sale situations, buyers are not only able to inquire about the property’s condition with the current owners, but they are generally able to physically view the property and conduct a home inspection to determine its true condition. 

Properties purchased during a public foreclosure auction do not allow the buyer such luxuries as inspection of the property. This can make buying at auctions a pretty risky investment, especially for inexperienced buyers.  Purchasing at auction can still get buyers some of the best deals on the property, but not knowing full well what you are purchasing can be a costly mistake. 

Properties that do not sell during pre-foreclosure or at foreclosure auction become what are known as REO properties.  These are bank-owned properties.  Generally, these are the “safest” of properties to buy in the foreclosure family.  Banks and financial institutions do not want to own real estate and in an effort to quickly remove such assets from their books, most lenders will perform major repairs on the properties to make them more appealing to a buyer.  This is not guaranteed and generally, most other repairs are left untouched, but the other great part about REO properties is that the buyer is able to have a professional home inspection completed before any contracts are signed.  REO properties are generally priced around 20%-30% below market value.  If investors and buyers get a fairly clean home inspection report, they are looking at a great investment property.