For those that are home hunting and are on a limited budget then buying a foreclosed home may be the best option. However, as with any major purchase you do need to educate yourself before singing on the dotted line. There are homes that are already foreclosed on and those that are heading towards foreclosure and these homes are called pre-foreclosed homes.
Pre-foreclosed homes have some advantages to them. Since they are being sold by a motivated seller you have some room to negotiate the price. Most pre-foreclosed homes are represented by a knowledgeable and professional realtor and attorney. This really helps with the sale as they are your main sources for communication as to what is going on in the home and how likely you are to close on the sale. Lack of communication has to be one fo the biggest downsides to buying a foreclosed home.
However when you are dealing with a pre-foreclosed home and hence a realtor you are talking about adding a premium to the price of the home. A realtor takes a cut of the final selling price and then will try to drive the price up a bit in order to increase the pay day for him or her. While you may get a home at a significantly reduced rate you will end up paying more then an already foreclosed home.
There are some cases but not often when a pre-foreclosed property is being sold directly by the homeowner. The advantage of this is that you can get a lower price then if you had to deal with a realtor. However, since the homeowner would like to pay off any debts he may have he or she may also try to drive up the price as well in order to avoid the sting of a foreclosure on his or her record.
When a homeowner is going through foreclosure there are many different emotions going through their mind. Many people try and wait it out and see if the bank will give them a reprieve. While this is not going to happen if you seem pushy or too eager to buy from them they are probably less likely to sell it to you. The rule of thumb is to be firm but not too pushy when trying to close a deal with the homeowner.
Pre-foreclosures are some of the best homes to buy in this market. They are at bargain basement prices with motivated sellers. Since you do not have to deal directly with the bank or the local law system you have room to negotiate. Just keep in mind the other person while trying to do so otherwise you may end up with nothing at all.