Don’t Buy a Foreclosed House Without Reading This First
(RepublicanNews.org) – Mortgage payments can be overwhelming. Some people have no choice but to default on their loans, especially if they lose their job. While banks don’t like debtors skipping payments, there’s not much they can do when someone cannot pay other than move into foreclosure. Buying a foreclosed home can save you big bucks on the cost of a new house, but how exactly does this process work?
The first step is to find foreclosed houses on the market. The Internet is a powerful tool allowing people to search for results in specific regions. Real estate agency databases and bank websites are a great place to start. Foreclosure.com is another ideal resource.
There are also offline places to search for foreclosure sales. Try visiting bank offices or looking in local newspapers in the classifieds section.
Buying a Foreclosed Home
If and when a person finds a home they like, they can move on to buying. It is important to note that the exact procedure may vary slightly depending on the seller and your state. Even the type of property you intend to buy, and your current credit situation, can play roles.
Government-owned homes are often the result of a buyer defaulting on a federal mortgage loan from the Department of Veteran Affairs (VA) or Federal Housing Administration (FHA). When these houses enter foreclosure, the government repossesses them and sells them through brokers working for the agency that originally sold the property.
In order for a person to buy a government-owned foreclosure home, they must speak with the broker directly. To find properties available from these agencies, people can visit the US Department of Housing and Urban Development (HUD).
These sales happen after the lender has already given notice to the borrower and allowed a grace period for them to catch up on missed payments. Sheriff auctions allow the lender to get their money back quickly on the defaulted loan. Local law enforcement agencies typically run these auctions on the local courthouse steps.
The auction takes place on a publicly announced date and time. Potential buyers can find these auctions online by searching for sheriff sales or local newspaper listings. During the auction, the homes sell to the highest bidder.
Properties go into pre-foreclosure after the lender notifies the borrower they’re behind on payments and defaulting on a loan. However, the home isn’t offered for sale through an auction at this point. The borrower has a chance to sell the home to avoid going into foreclosure, which negatively impacts their credit.
City and county buildings often have these properties listed on campus. Potential buyers can also find them on Foreclosure.com and other online sources.
Benefits and Risks
There are several benefits to buying a house in foreclosure, including getting deals well below the market value. Depending on the stage of foreclosure the home is in, a buyer could potentially save even more money. Still, there are just as many disadvantages, too.
Be wary of the “as-is” status of foreclosed homes. As any used car buyer will tell you, “as-is” may mean cheaper, but can also mean “in worse condition,” too. Saving $20,000 isn’t worthwhile if you end up needing to spend $50,000 on repairs. As-is homes may leave a buyer fending for themselves with any damages.
The process to buy a home in foreclosure may also be slower, sometimes taking several months to complete. Unfortunately, some locations may also come with baggage, such as liens and back taxes, that must be paid before a person can own it.
It may seem harsh to buy a home that another person is in the process of losing, but the benefits are undeniable. A person looking for a modest house with little or no money down has a better chance of buying a nicer home for a lower cost through foreclosure properties.
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