The word "foreclosure" may take different meaning depending upon the situation.
1) A property in a foreclosure process, that has a high enough market value to cover the mortgage payoff, selling expenses, and all other liens on a property is no different than any other sale. The sellers are the people who purchased the property, and they are ones who will sign the contracts and make all decisions about the sales process and closing. The sellers may be rushing against a clock, depending upon where they are in the foreclosure process. The sellers still own the property, and there is no reason they need bank approval for the sale. The sellers might decline to make repairs, and they may want a quick sale. The difference in closing may be that the sellers want it done fast.
2) If the property is in foreclosure and the collective liens (mortgage and other) exceed the market value, this would now become a short sale. (Not all short sales are in foreclosure, but it is common.) A short sale exists when the amount of money a property can bring is short of the amount needed to pay off all the obligations required to close title. The lender, and/or other lien holders, agree to take less money than the amount due in order to let the title transfer to the buyer. The lender may forgive part or all of the debt; or the lender may require the sellers sign a note to pay the lender after closing part or all of the deficiency amount. If you want to buy a property in foreclosure and the value of the property is less than the collective liens, it will require the approval of the lien holders. The seller and buyer still sign the HUD, because the seller is still the property owner. You negotiate w/ the seller, and the seller sends all the contracts to the bank (and other lien holders) for approval. You wait...and sometimes wait some more. This requires patience and the outcome can be unpredictable. It's possible, and done every day. Just be prepared for the unexpected. The success rate decreases when there are multiple lien holders.
3) A foreclosure at auction or sheriff sale is a court ordered sale. You might not get to see the inside of the property, and have no warranties. You wonâ€™t have a title policy and your deed may not have any type of warranty. This is not for the inexperienced. There is risk involved and one should be ready to bear that risk and fully understand it before proceeding in to this arena.
4) A property that has been foreclosed has been through the complete legal process and the bank now holds the title. You are now buying an REO property. It is bank owned, and the bank is your seller. Expect little information, no disclosures, and an "as is" sale with no repairs or credits. Neither the agent, nor the bank will have much info. You will be able to see the property, do inspections, and even have the right to walk away (if that right is included in the contract) if inspections reveal major or substantial defects. Once a bank (the seller) signs and accepts your offer, it moves much like a regular sale. The closing process is much like it would be with any homeowner, except the bank is on the HUD since they are the seller.
My comments here are only an overview and not meant to be all inclusive. There are many more details involved, and I don't mean to oversimplify it.
Deborah Madey - Broker
Peninsula Realty Group - New Jersey
The time frames set out by contracts used by realtors may be extended as well as getting an answer from the bank. The bank may not be interested in any repair work on the house and sometimes seller closing costs may be passed on to the buyer. Other than that, the process is the same. I hope I have answered your question. Your title insurance should protect you from outstanding liens. Good Luck. There are some great deals out there.
Prudential Network Realty
Atlantic Beach, FL 32233