Buying foreclosed property
With a slowing market and all-around higher monthly mortgage payments, many people are looking for a real bargain if they are going to buy a home.
Buying a foreclosed property is one way that homeowners are getting better-than-market prices on their new abodes.
A foreclosed home means that the previous homeowner did not pay their mortgage payments, and the bank essentially took the home away.
If you are looking into buying a foreclosed property it is important to understand all of the risks involved. Because although they can be very good deals, there are some things to keep in mind.
“As some homeowners get squeezed by higher mortgage interest rates and a cooling real-estate market, many house bargain-hunters are turning their attention to foreclosures. They hope to get good deals by buying from homeowners who are falling behind on their mortgages or by buying after the lenders have seized such properties. Confirming the trend, online Web sites such as Foreclosure.com, Foreclosures.com and RealtyTrac.com, which list foreclosed properties and charge subscription fees, all report an increase in listings.”
Although this is a great opportunity for people who may not be able to afford a regular home, there are some risks to remember, and strategies to buying foreclosed property.
Buying a property in the pre-foreclosure stage is when you are going to get the best deals, but they can also be very difficult to handle. The pre-foreclosure is the stage from when the homeowner receives a default notice from their lender to the time right before the property is taken away from the owner and put to auction.
“But there are some catches to this. For starters, you have to deal directly with the owner of the house, who may not even be aware that the house was made public in a foreclosure listing. Even if you come to an agreement with the owner, you may have very little time to complete the transaction. Depending on which state they call home, the owners may have only a month before the bank puts the home up for auction.”
Another way that potential buyers can obtain foreclosed homes is through foreclosed home auctions, although there are many dangers to this.
“If buying pre-foreclosures is tough for the regular home buyer, buying at an auction can be downright impossible. For starters, you have to pay cash, since financing auctioned properties isn't allowed. You're also expected to buy the house sight unseen. And on top of that, you're not allowed to get title insurance: If the house has a $100,000 tax lien attached, the new owner will have to pay it off. ‘The auction is the most risky way to buy,’ says Foreclosure.com's Mr. Geisen. ‘We don't recommend it.’”
Hands down, the easiest way to purchase foreclosed properties is to buy foreclosed deals after the whole process; although you may not get as deep as a discount, it is definitely safer.
“If no one shows up on the courthouse steps or there are no bids high enough to cover the outstanding loan, the bank will take ownership of the property and put it up for sale. This is the easiest way to buy foreclosed properties, but you are also least likely to get a discount, as the bank will typically put houses up for sale at or close to market value.”
