Tips for Buying Foreclosed Homes
Foreclosure is a reality that many people are facing today in light of
the economic and housing crises. Foreclosure is a type of legal
proceeding which is taken by a mortgage lender or a bank when a
homeowner defaults on a mortgage loan. There are actually several steps
involved in the foreclosure process; including pre-foreclosure, auction
and bank owned. During each of these steps it is actually possible to
purchase a home if you know how to locate homes that are to be sold and
who to contact.
Pre-Foreclosure Sales
A pre-foreclosure is fairly simple. This step occurs between the time
period when the bank has made the decision to foreclose on a property
and when the actual foreclosure occurs. When the bank makes the decision
to foreclose they notify the homeowner of the intent to foreclose. A
notification known as a Notice of Default or a LIS Pendens is sent to
the homeowner. This notification must be filed with the County
Recorder's Office and the bank will not be allowed to release such
information to investors but it is possible for investors to research
records at the Recorder's office and find out who may be in
pre-foreclosure. The next step would be to contact the homeowner and
negotiate a deal with them to purchase the home before the bank actually
forecloses on it. Homeowners may find these types of deals attractive
because it allows them to avoid having a foreclosure placed on their
credit record.
Auction Sales
Once foreclosure proceedings have actually begun, a Notice of Trustee's
Sale or Notice of Foreclosure Sale will be filed. This is the official
announcement that a home that is being foreclosed upon will be sold at
auction. Anyone from the public can place a bid on a home that has been
foreclosed upon and is being sold in a property auction. The individual
who places the winning bid will then be obligated to purchase the home
and will become the new homeowner. Locating foreclosure homes online is
an excellent way to find out about such sales and possible purchase a
home for far less than its value.
Banked Owned Properties or REO
When a property is owned by a bank it is sometimes said to be Real
Estate Owned or REO. This is a property that has already gone through
the process of foreclosure and is fully owned by the lender. A lender
may then decide to sell the property at auction or simply sell it
outright. In some cases the bank may consider selling the property just
for what is owed on it. This can make it possible for an investor to
purchase a REO property for just few thousand dollars. All the bank is
usually interested in at this point is getting back the money they have
lost on the home and having it taken off their hands.
By buying a home either during or after foreclosure, you can easily save
quite a bit of money. Estimates indicate that the average savings on
purchasing a home that has been foreclosed on is about 30%. When you
take that into consideration, it means that you could purchase a home
with a value of $200,000 for a mere $140,000. The savings can easily be
converted into making home improvements or reselling the home at a
higher profit later on.
Due to the large number of foreclosed homes that are on the market
today, it is fairly easy to locate possible purchases online. In
addition, your local real estate agent may also be able to help you
locate homes that are banked owned and which can be purchased for just a
fraction of their actual value.
When purchasing foreclosed homes, there are a few things that should be
kept in mind. First, you need to consider the condition of the property.
It is not uncommon for some homeowners to stop tending to maintenance
and repairs around a home when they know they are about to lose it
through foreclosure. This means that while you may save some money by
purchasing a foreclosed home, you should also be prepared for the
reality of needing to make some repairs. Second, you should always
verify whether the previous homeowner has actually vacated the home or
you may find yourself in the position of needing to evict them.
While these are two areas that should be taken into consideration,
purchasing a foreclosed home can still be an excellent way to save money
on the cost of your next home or investment property.
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