Purchasing A Foreclosure
A way to buy a foreclosure home at a discounted price is to either purchase it at an auction or through a lender. However, buying a foreclosure property can be complicated. This is what you need to know about buying a distressed property.
What Exactly Is A Foreclosure Property?
Foreclosed homes are when a lienholder or lender seeks to seize a homeowner's property to pay off a debt. The lender has two options: to take the property as their own or to sell it to repay the debt. The lender is not always looking to make a lot of money on a loan-gone-bad. They are just trying to get a fair amount that covers the mortgage.
What Is Pre-Foreclosure?
Pre-foreclosure properties are not always available for sale. Pre-foreclosure is the period between the homeowner receiving a default notice and the property being sold at an auction. The owner might be trying to resolve the loan default or hoping that a cash buyer will buy the property before it goes into foreclosure. This would be bad for his credit. Experts consider this to be the most difficult time to buy a distressed property. You will deal directly with the owner and not a mortgage or bank.
Pre-foreclosure can offer great deals. However, these houses aren't yet available for sale and may not be on the market if the owner has paid off the debt.
What Is A Foreclosure Auction?
Attend a few auctions if you are a newbie to the world of auctions. The goal is to learn, not buy. While some auctions are quick and easy, others require a lot of time. Others are more complex and involve multiple properties. Once you find the property that you like, you will be able to jump into my understanding of how the auction works.
Once you have found the property you wish to bid on, contact an auctioneer or trustee for information about how much you will need to bring to the auction. The amount varies from one state to another. Many auctions require that bidders bring a $5,000 certified check made payable to the auction company to prove their legitimate intent. Sometimes, a percentage must be paid on the day of the sale to ensure that the winning bidder is eligible. Before bidding on a foreclosure, make sure to research the auction requirements for your state.
Remember that your auction bid will be final.
How To Locate Foreclosure Properties
Your agent will direct you to foreclosure listings on the Multiple Listing Service, a professional-only database.
Other sources of distressed property information include newspaper legal notices, bank websites, and government websites such as the Federal Housing Administration. You should be wary of ad-based subscription websites. They may contain outdated or inaccurate listings.
A Few Words Of Caution
Distressed properties will generally be sold "as is," meaning that what you see is what you get. You don't get any warranties, so ensure that a certified inspector inspects the property before offering. In addition, it is important to find out how much it will cost for the property to be habitable or flippable.
Lenders usually clear the title before listing a foreclosure. However, hiring a title company to research and treat title problems before closing on the property is wise.
Before you make a bid, it's a good idea that you have the financing in place. Even if you offer cash, don't expect a deal to be done quickly on bank-owned properties. Multiple eyes will need to review the deal and make a decision on your offer. It can take several weeks to complete, so please be patient.
