We have all heard the old proverb, "If it sounds too good to be true, it usually is".  When considering the purchase of foreclosure properties, this can often ring quite true.  The flood of foreclosed properties on the market includes properties that are being sold thirty to forty percent below market, but many buyers end up paying only five percent beneath market at closing.  Sound mysterious? Not really, there are many factors beyond price that can make a great sounding foreclosure purchase turn out to be just like buying a traditional home.  So how can you know the foreclosure property you're looking at is the deal you think it is and need it to be?

There are several factors to consider when deciding on the best foreclosure property for your budget and for your profits.  Before making a foreclosure purchase, you should always carefully read the facts about the home's title and investigate all possible liens. Make sure there are no liens other than the one to the lender that is selling the property. A thorough check of the previous owner and all their legal issues, divorces, settlements and even utilities can save you big bucks on your total foreclosure investment. 

Foreclosure buyers definitely need to consider the area that property is located. Properties in the Southeast experience windstorms and hurricanes as well as coastal properties nationwide.  You can always find great foreclosure deals in such states but you may find yourself with a home you cannot insure. Homes in flood areas with a history of flooding often don't have flood insurance coverage available to them.  This will affect resale and even home ownership.

Experts suggest that foreclosure buyers exercise due diligence in researching potential properties before buying.  Don't limit your research to just your property of interest, evaluate the last 5 years of real estate property sales in the area as a whole. The property should be within an economically healthy area. 

Those same experts suggest that you have an appraisal done by a professional and a home inspection completed if possible.  Home inspections and repair estimates are the number one area that people lose their shirts on foreclosures.  You have to make sure you can come out on top, especially with home values so depressed.  In many areas today, even if you put $20,000 into a home's repairs, you are only maintaining the home's value rather than increasing it.  This means that even though you can probably sell it for a small profit, the buyer may not be able to get the lending because the house doesn't have the value in a market comparison.

Remember, in most cases, you will be bidding against experts who turnover foreclosure properties everyday for profit.  This can really take the steam out of your saving sales as they will bid aggressively in the beginning driving prices closer to realistic market values.  Know when to say when and don't cross your personal spending line.  Establish that line by checking the latest foreclosure purchases in the community and finding a pattern in the lucrative bids and just exactly how much below market they really are.

The safest of the foreclosure purchases are to buy after auction and get an REO or real estate owned property.  Most liens have been cleared on an REO and in many cases, the properties have been cleaned out and even some repairs completed.  Make smart foreclosure buying decisions and keep your shirt!