Purchasing a home nowadays has become a task in itself with banks being so reluctant to lend. Trust me. I know. I am a mortgage broker, too, and that’s with a traditional transaction from a buyer and seller. NOW, throw in the difficulty of buying a foreclosure. You now have to deal with the bank, the title company, Realtor and usually the county or city where the auction will take place.
Needless to say it is much more difficult to do then just buying a home from a very motivated seller. A large misconception about buying now is that the only way to get a deal is to buy a distressed or foreclosed home, and that simply isn’t the case. There are many sellers out there who price their homes at the same level as foreclosures just so they can compete. BUT, if you are still insisting on buying a foreclosed home there are some very important steps and issues to consider.
Read more about the advantages and disadvantages of buying a foreclosed home.
1.) Foreclosure is a process that allows a lender to recover the amount owed on a defaulted loan by selling or taking ownership (repossession) of the property securing the loan. It begins when a borrower/owner defaults on loan payments and the lender files a public default notice or a lis pendens (Latin for “lawsuit pending”), depending on the state.
Ultimately, the foreclosure process can end one of four ways:
- The borrower/owner pays off the default amount to reinstate the loan during a grace period known as pre-foreclosure
- The borrower/owner sells the property to a third party during pre-foreclosure, allowing the borrower/owner to pay off the loan and avoid having a foreclosure on his or her credit history
- A third party buys the property at a public auction at the end of the pre-foreclosure period
- The lender takes ownership of the property, usually with the intent to re-sell. The lender can take ownership through an agreement with the borrower/owner during pre-foreclosure or by buying back the property at the public auction.
2.) Choose a foreclosure setting you are comfortable with.
- How to Buy a Pre-Foreclosure House
- How to Buy a House at Public Auction
- How to Buy a Bank-Owned Property (REO)
4.) Find foreclosure properties.
5.) Check property liens.
- One method of doing this if you are serious is to contact a title company or a real estate attorney to get a few names of title abstracter. Pay them a $125 +/- to search the title for you if you are serious about a particular property.
6.) Do the math.
7.) Research local and state foreclosure laws. (Better yet, consult a real estate attorney.)
8.) Find financing.
9.) Know Who to contact and how to approach the owner. (Consult your real estate agent for this)
10.) Make an offer with your agent.
Information in this post from HGTV.com