By Guest Author Lee Keyes

Before signing any agreements or finalizing any pricing on a foreclosure property, you need to do some homework to ensure that you are getting a good deal. A big mistake some buyers have made when purchasing at the pre-foreclosure or even the auction stage is buying a home without knowing that it had additional liens on it and not knowing that the value of the home was less than they thought.

Here’s how you can prevent those mistakes from happening to you.

Checking Property Liens

A lien is a claim against the property by made by someone in order to secure payment of a debt. For example, the lender who holds the property’s mortgage has a lien against the home. However, liens can also be placed against the property for outstanding taxes and other unpaid debts. If a second mortgage has been taken out on the property, then this is another lien against it, too.

If you purchase the property without being aware of these additional liens, ownership of the property will not be transferred to you until those debts are taken care of as well. This is why some buyers choose to purchase property in the REO stage because by this point the only lien holder is usually the lender.

However, you can and should check for property liens on any foreclosure property you are considering purchasing.

To check for tax liens, you may need to contact the county revenue office for the areas where the property is located. This information is easy to find using the Internet. In most cases, you can either call or send a written request for the information to the office. Before you do though, you will need the following information: the parcel number (a number assigned to the property for tax purposes), the property owner’s name, and the physical address of the property. With this information, you will be given a record of unpaid taxes for the last ten years, as well as the property’s value used for assessing taxes.

You will also need to do a title search to check for other types of liens or title problems. While you can conduct your own search at the county clerk’s office in the property’s county, this can be time-consuming. Some county clerk’s do have web sites which allow for title searches on the Internet, but these may not provide complete records. In most cases, your best bet is to hire an attorney to handle the title search for you. Obviously, this will cost more, but you will know the results are complete.

Checking Property Value & Equity

When you check for tax liens, you should learn the property’s assessment value. However, this figure may not be exact. If you want to know the property’s value, you should hire your own appraiser.

The appraiser will charge between $200 and $400, on average, to come to the property, examine it, and compare it to the other properties’ values in the area. He or she will then prepare a detailed report that provides you with the home’s current value.

In some cases, the other party in the sale will offer to provide an appraiser. This is usually not a good idea. If the appraiser is working on behalf of the seller, he or she may artificially inflate the property’s value to make it seem like a better deal. You should choose your own appraiser so you can feel confident in the results.

Once you know the property’s value and the outstanding amount of the mortgage and liens, you can calculate the home’s equity. Add up all the money that is still owed on the property, then divide that amount by how much you are going to pay for the home or its current value. For example, if you are purchasing a home valued at $200,000 by paying off the remaining $150,000 mortgage then you would determine the property’s equity by dividing $150,000 by $200,000. The result is a loan to value ratio (LVR) of 75% which leaves 25% as equity.

The bottom line is that even though buying a foreclosed property may sound like a good deal, you need to do some research before finalizing any agreements. Otherwise, you may end up with a house that isn’t worth what you paid for it.

How can you be sure that you’re getting the best advice when it comes to buying foreclosures? Research and reliability. Realty Opportunities give you both. Learn more today. You could be the next happy homeowner on your block.

Article Source: http://EzineArticles.com/?expert=Lee_Keyes

Bob Roscoe, Mortgage Marketing Associates, Minneapolis, Minnesota
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