Your second question, I believe, would better cover a "tax sale" or Sheriff's sale". This is dangerous water for most buyers that are looking for a bargain. Many of these homes are bought sight unseen. Most buyers don't have the time and expertise or the money to pay someone to go to the court house and search the records for the history (outstanding debt, liens, etc.) on the properties they are interested in bidding on. I'll give you an example. If you were the successful bidder on a home that was valued at $100,000.00 and you got it for the taxes owed of $2,900, you'd be jumping up and down for joy, wouldn't you? Not really. Because, you've just bought a home with all it's outstanding debt. You could owe the outstanding amount on several lines of credit that the previous owner took out against the home, or have mechanics leins, etc. This amount could total anywhere from a few thousand dollars to more then the home is actually worth. You've just bought the previous owners debt load and the reason they got behind in their taxes and lost the home.
If you'd like even more information about these two subjects, feel free to contact me.
Century 21 Advance
The foreclosure process is quite lengthy and starts when the borrower defaults on the loan. The following steps are included but are probably not all of the steps in the process after the borrower defaults.
- The lender petitions the court to sell the property.
- Borrower notified, has chance to catch up on payments, fees, remaining balance of loan.
- Borrower can't pay, home is slated for sheriff sale.
- Borrower can petition the court to stay the sale.
- If the sale goes on, potential buyers bid for property.
- If the property is sold at sale, sheriff evicts squatters (prior borrowers).
- If the property is not sold, the bank â€œbuysâ€ the property back.
- Bank puts the property on the market through a broker.
- For lenders who have VA or FHA backed home loans, they give the property to those agencies recovering the funds and those agencies either list with a broker or post those properties on their own web sites.
Now, even before this happens, the borrower sometimes lists the property (with the lender's approval) as a short sale (the price of the home is less than what is owed).
Moral: Get a real estate agent to help you out. They can show you properties which are either in foreclosure or will be a short sale. They can also assist you with properties which are slated for sheriff sale to see if they would be profitable.
Hope that helps,
Longer answer - Read Kathleen's answer. She's done a good job of explaining in few words.
Additional note - time to find a live, licensed, and patient Realtor and sign up
Post Script - stop reading misleading sites that tell you that the estimated sale price of a home is 1/100 of the value