Buying & Fixing Up a Foreclosed House

Get the money together. Most foreclosures that are sold at auction require that you have a down payment, so save up 10 to 20 percent of what you plan to spend on a home. If you do not have anything saved up and you’ve been in your current home long enough for it to have gained value, you may want to consider taking out a home equity line of credit to finance the purchase of your foreclosed home. Once the foreclosed home sells, you should be able to pay off the line of credit in full with the profit. The down payment isn’t the only money you will need. You’re also going to need money for any necessary repairs or remodeling projects. In addition to that, you’ll need to be able to make the mortgage payment while you are in the process of fixing the home up. Be prepared to pay the mortgage for quite awhile in case the home doesn’t sell right away.

Find foreclosures. There are many websites out there to help you find foreclosed homes in your area. You can choose to search websites that have lists of different bank-owned foreclosed homes, such as ForeclosureDeals.com or All Foreclosure. You can also go to individual banks' websites. Many big banks like Chase have web pages dedicated specifically to their foreclosures.

Choose the right home. Location is going to be of utmost importance if you want to maximize your profit. Ideally, you’ll want to find a home in a desirable neighborhood that just needs some cosmetic work. Avoid buying a home that is in serious need of structural repair, like cracks in the foundation.

Fix up the home. Do as much of the work as possible yourself to get the greatest return on your investment. Start by giving all of the rooms a fresh coat of paint. Add to the curb appeal of the home by mowing, weeding, cutting back messy shrubs and bushes and planting fresh flowers. If you’re ready to tackle bigger projects, the rooms that will almost always bring in the most profit are the kitchen and bathrooms. If the kitchen and bathrooms are outdated, consider remodeling.