The following is an excerpt heavily edited (condensed) from a full article authored by Ethan Roberts, contributing editor of The Tycoon Report and distributed on 11/06/09.

Beware These 5 Caveats When Buying a Foreclosure
Friday, November 6, 2009
Thanks to the tax credit for first-time homebuyers along with low interest rates, home sales have been creeping up during the past few months. However, a very large percentage of home sales are either foreclosures or short sales.
First-time buyers and investors alike are looking for a deal -- whether as a safeguard against further market decline, as a way to lower their monthly payment, or as a vehicle to increase potential profits.
BUT NOT SO FAST!
If you are not careful, you might get a home at a great price, but you can also inherit some big problems. So that you don't find yourself investing in a money pit, I'd like to talk to you about some of the most-common problems you might encounter today.
1. You Get What They Don't Pay for
First, what you must realize about foreclosures is that they are often neglected by their former owners. The routine-maintenance projects that people do to keep up their homes are usually not done, because the owner cannot afford to do them.
2. Beware of a Real 'Steal'
Second, with some foreclosures there is a problem with theft or vandalism. It is bad enough when the thefts occur prior to your bidding on the property. At least then you know what is missing and can bid accordingly. However, sometimes the thefts or vandalism occur after you have already gone to contract.
3. Know Your Boundaries
Third, although the banks will not usually pay for a survey, make sure that you have one done. Most mortgage companies will demand that a survey be performed, but it is recommended even on cash deals.
4. Know Whether the Deed is Really Done
Fourth, understand that sometimes with foreclosures, there are title problems that can delay or even prevent the closing from taking place.
Also be sure that you are getting owners' title insurance, and lenders' title insurance as well if you are taking out a loan. One time, I was the selling agent on a foreclosure. After the closing, it was discovered that there was a $25,000 lien on the house that was missed by the title company that closed the escrow.
5. Don't Spend a Dime Till You Can Say 'The Title is Mine'
Fifth, if the foreclosure you are buying is sold at public auction, in some states you cannot receive the certificate of title for 10 days. During that time, the previous owner has the right to pay off his mortgage debt in full and reclaim his home.
So, you had better wait until you have the certificate in hand before starting any work on the house. Otherwise, you might just wind up remodeling another person's home for free!
So, these are the five caveats that I wish to leave you with today. At any rate, I do want to emphasize that buying a foreclosure (or sometimes a short sale if it's cheap enough), can be a great way to find a home that might otherwise not be affordable, or that may provide you with a great deal of instant equity.
But just be careful, do all your due diligence, have all the inspections done, etc. You may just save yourself a whole lot of time, inconvenience and money!

Ethan Roberts, Contributing Editor, The Tycoon Report

Source: www.tycoonreport.tycoonresearch.com/ 11/06/2009