A foreclosure is simply a home that has gone through the legal process of being repossessed by the bank. The property is then disposed of through the asset management division of the bank or through a third-party asset manager.
There are two ways to buy a foreclosure â€“ through auction and on the open real estate market. Until the home has completed the foreclosure process the homeowner has every opportunity to save the home: 30 day period of redemption. Once the 30 days for redemption has passed and the homeowner cannot come up the delinquent mortgage payments, the home goes to auction. Auctions are announced in local newspapers so you know when a particular home will be put on the block. Youâ€™ll have only a little time to drive by, and you will not be allowed inside as usually the home owner is still residing in the home.
At auction, the home goes to the highest bidder and the proceeds go toward the remaining mortgage debt. If you want to buy at auction, be prepared to bid against other investors on the courthouse steps and to pay cash for the home if your bid is accepted. Donâ€™t let excitement rule you; stay within your planned maximum bid. If the home doesnâ€™t sell at auction, the bank takes the home back as an Real Estate Owned (REO), property. From there the property is typically turned over to an asset manager and put on the real estate market.
Once the REO is listed with a real estate broker, you can buy it just as you would any other listed property, with a mortgage loan. If the home is in good condition, location and priced reasonably, be prepared for multiple buyers pursuing the same home. You need to react quickly and have all your paper work completed. If getting a mortgage for the home, get the pre-approval letter from your lender now. When you shop for an REO, consider the same things you would in any other home location, condition, features and price.
Asset managers may be handling hundreds of properties in your area. They may be unresponsive to low-ball offers, or refuse to negotiate at all. Their job is to get the most return possible for the bank, be patient, foreclosures take time. Foreclosures are often in poor repair or have been stripped of their appliances, mechanicals, flooring, even drywall, so be prepared to put some sweat equity into the home or to hire a contractor. REOs are sold â€œas is,â€ which means buyer beware. Banks seldom do any more than make repairs required by federal lending standards. Talk to your lender. Several lenders offer home improvement loan programs which become part of the monthly mortgage payment.
From the initial time the contract is submitted, have the home inspected by a professional. This will be a cost to you but, you then you will know if you want to proceed with the purchase or rescind the offer. The home may have unseen structural issues which maybe cost prohibited.
Â With my knowledge and personal experience, I have helped several clients, thru pre-foreclosure, foreclosure and a short sale. IÂ can help make the process as pain free as possible.Â Call me today. Â ~PAM