So you want to buy a foreclosure?
A foreclosure sign in front of a house for sale in Stockton, Calif.
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TESS VIGELAND: Unfortunately for a lot of folks, renting the home that you used to own is still not an option, despite the fact that banks might benefit. But if you're in a buying mood, thousands of foreclosed homes are just waiting for you to come and take a look-see. Adam Allington reports from St. Louis.
Adam Allington: Matt Kastner is a real estate broker in St. Louis. His primary business is foreclosed properties. And one thing he's gotten really good at in the past year is low-balling banks.
Take this bank-owned condo that we're in now. Its 2,000 square feet, new floors, kitchen, bath. The original listing price last year was $125,000, but now...
Matt Kastner: Early this year it was down to 69, that listing expired. The fact that it hasn't sold at 69 already and it's been over a month, you could probably get this thing for $55,000.
But Kastner says the real steals, don't last long. And the days of overnight pre-approval for a mortgage are well behind us. He says the most important thing is to have your financing already lined up.
Kastner: The loan process right now is definitely more time consuming than it was before. So if you don't have your homework done already, you're probably not going to get that property.
A few years back, if you were interested in buying a foreclosure that usually meant buying "as-is" and don't even bother trying to haggle with the bank over that leaky roof or closing costs. But now that's starting to change.
Jess Tirado: Well, I can tell you for Wells Fargo, we do a lot of negotiating.
Jess Tirado handles the reselling of foreclosures for Wells Fargo.
These days many people looking to buy are financed with loans from the Federal Housing Administration. Those loans often come with conditions, like the property has to be livable -- no sketchy wiring or bad plumbing. Tirado says that means in order to move foreclosures off their books banks are having to behave like traditional sellers.
Tirado: It is not uncommon at all for us to pay a certain amount of closing costs. Even, you know, once an inspection is done, they find other things that need to be repaired. We do that quite a bit.
Neil Gellman just bought what he says is his "dream home" -- a two-story arts and crafts-style townhouse that was in foreclosure.
Neil Gellman: How are you?
Allington: Hey, Neil.
Gellman: This cul-de-sac was built in the 1920s.
Gellman had been looking for an affordable home in the affluent St. Louis suburb of Clayton for years. He got this property for $100,000 below its original list price, but it's not all money in his pocket.
Gellman: The house was just a mess. You know, I have one dumpster here, the bank had at least two dumpsters prior.
The advantage of buying a foreclosure is that you can get the property at discount and have cash left over to fix any problems. But there's also the temptation to focus on the sale price and underestimate the cost of repairs, which Gellman says can come back to bite you.
Gellman: Municipalities do have inspections, they do have occupancy permits for resale, etc.
And unfortunately for the do-it-yourselfers among us, that often means hiring professionals.
Gellman: You don't want to get yourself in a situation where you can't afford to pay contractors to do the work because it's going to catch you on resale.
"Catching a falling knife" is the analogy used to describe investing in real estate these days. But at the end of the day broker Matt Kastner says if you are looking to build long-term equity and can lock-in an affordable interest rate, you could do a lot worse.
Kastner: When you can buy something that's just about live in ready for $75,000 that's a great place in a good neighborhood, you really can't ask for much more than that.
Kastner says above all else people need to get inspections -- building, termite, sewer, at least. Know what your working with before buying. Because first time in a long, long while buyers are able to drive a hard bargain. And many sellers, banks included, are willing to take that offer.
In St. Louis, I'm Adam Allington for Marketplace Money.