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Interest in the purchase of foreclosed houses has been maintained for decades. It can become weak or rise again depending on the current social and economic situation and various types of crises. However, the foreclosed property is still a piece of cake for those who could not afford such a property at its market value. Now, if you don’t mind buying one, it’s one thing to find the option of your dream. Now, we will tell you how to find foreclosed houses near you and avoid pitfalls while purchasing.
Why Do People Buy Foreclosed Houses?
Everything is simple here, as it is the price that beckons! Indeed, buying a foreclosed house will cost you less than a similar property in the same area offered at market value. Considerable discounts, the chance to purchase at a low rate or with a reduced down payment, and the absence of appraisal fees are becoming strong extra incentives.
The reasons for this benefit are apparent. Homeowners are in a financial bind while time plays against them. They have to shoot and use every opportunity available to win at least some money for property, so they are ready to negotiate and concede.
The saying “wasn’t for bad luck, wouldn’t have no luck at all” is an excellent way to describe the situation with a seized property for the prospective buyers. Indeed, the sheriff is not interested in keeping the foreclosed property for long, and banks are reluctant to engage in the landlord business. As a result, both want to get rid of the real estate under seizure at a reasonable price and give satisfactory reports to investors and auditors. That is why the buyer receives certain benefits.
However, do not lose your head if you have found a foreclosed house that is perfect in all respects and agreed on an inspiring price. Real estate with this is a medal with two sides, and the second can cloud your joy of buying. Let us talk about it below.
Why Should I Keep My Ear Open While Buying A Foreclosed House?
The price should never obscure the mind! Be on your guard and assess the consequences of pitfalls that may lie in waiting for you after you have deposited money for the foreclosed house.
“As Is” Sales
Putting a foreclosed house up for sale does not involve viewing, so that you may encounter a very depressing state of your new property. It is essential to understand that if people do not have funds for mortgage payments, then it is quite possible that they cannot afford the repairs and the proper home care as well.
Besides, losing a house is very stressful, and its owners may be in a state of passion, disappointed, or embittered. These emotions cause a desire to worsen the condition of their owning so that the new owners do not enjoy the fruits of their labors serenely. The consequences of such thoughts result in intentional damage to property or communications and other unpleasant surprises.
Be ready for the unexpected. Here we mean delinquencies, including back taxes and liens attached to them. They may be imposed by the Internal Revenue Service (IRS) or other lenders, which is typical for auction properties. If you lose sight of this, you risk incurring high extra costs. That is why it is crucial to ensure that all these collaterals are repaid before buying. As for REO purchasing, you can be calm here, so banks pay off all the encumbrances before selling real estate.
Competitors Are Awake!
Accept the fact that the house you like becomes a tidbit, not only for you. Investors, house flippers, and ordinary buyers seeking new housing become your competitors regarding valuable foreclosed properties. That’s why the bidding war is typical for such auctions.
Still, do not be upset if you fail to give the best offer and become the new owner. First, check the bank’s listing as it may reappear because the failure of a foreclosure deal is common. Second, yours will not leave you, and the purchase of your dream house is yet to come!
This is Taking So Long!
Tune in for an extended deal, as the sale of a foreclosed house implies a considerable amount of paperwork and an incredible number of additional documents. You will also have to wait for the creditor’s approval, but the response time may be delayed. The average waiting time for a bank can be up to 90 days, so you will have to curb your impatience.
Now, if all these warnings haven’t dampened your appetite and you’re all set on foreclosure affairs, we’ll tell you where to look for the property and how to act at the auction.
Where Can I Look Up Foreclosed Houses?
The listings of foreclosed properties are not classified today, so you can get them from various sources.
Web sites are one of the most helpful ways, as here you get everything at once. However, prefer sites that specialize in foreclosed real estate. Multiple listing services provide information about foreclosed property in the same way, but the status may not be shown in the listing, and sometimes you can see it just in the description. So, go fishing where you can see the catch right away!
Consulting with a real estate agent or broker is another bargain option. Lenders usually sell foreclosed houses through realtors, so they have better information than anyone. Do not hesitate to contact a pro because they are here for this!
Foreclosed Property Selling Options
Depending on the status of the property relative to creditors, various types of foreclosed houses can be sold. And this is another way to find the right property for you since each type becomes a public record. Let’s focus on them in a little more detail.
This status occurs when the owner fails with mortgage payments, but the house has not yet been auctioned. After three months of delay, the bank or other creditor sends a notice of default and the beginning of the pre-foreclosure period. As a rule, it lasts from 3 to 10 months, and this time is given to the owner to pay off the debts and maintain a positive credit history. In this case, he can sell the house as a short sale if the lender allows him. This position is helpful for the seller, the buyer, and even the creditor. The latter avoids the need to start a complex and costly foreclosure. The first pays off all his debts in a few days or a week maximum. And you… are getting a dream house in the century’s deal!
County and city courthouses will be a fishing spot for you, as it is here that pre-foreclosure lists are published. And, of course, do not forget about Foreclosure.com and other helpful online resources.
2. Short Sales
This method of sale implies that the homeowner sells it at less than the mortgage amount. Even those borrowers who are not in default can take advantage of a short sale. However, you need to be ready for the lender to ask you to prove your financial hardships – for example, to confirm the loss of your job.
The risk of buying a foreclosed property as short sales are that the house goes underwater. This term means that the price is lower than the outstanding mortgage balance. Here, you will also have to enlist the lender’s consent and make sure he is ready to accept a smaller amount than is owed.
The deal for a short sale is much the same as for a regular house purchase. However, the contract’s language usually specifies that its terms are subject to the lender’s approval. Besides, the bank will need time to decide on a short sale, and it may take several months to think about it. Be patient if this is a tempting offer.
Finding a foreclosed house for a short sale is easier since some companies and listing services include a search parameter for this status in their website filters.
3. Bank-Owned Property
The lender will put the foreclosure houses on auction. If it doesn’t find its buyer, it reverts to the bank. These houses are classified as REO, meaning real estate-owned properties. Banks open special departments to manage the sales of these properties, so on their website, you can often see lists of the real estate you are interested in.
For example, there are sections where you can view houses owned by the bank. For example, Bank of America, Wells Fargo, and Citibank have them. Besides, you can also refer to a respected third-party service, one of which was RealtyTrac. This online resource presents lists of REO properties, and you can search a foreclosed house by state, city, or even ZIP code.
4. Sheriff’s Sale Auctions
Sheriff’s sale auction becomes a bargaining chip for a borrower in default, allowing him to catch up on mortgage payments. This is possible during the pre-foreclosure when the lender notifies the house owner about the default but also gives him a grace period to pay off the debts.
As a rule, auctions take place at a city’s courthouse. Organizers give public announcements about the venue and time, so you can search for them online or in local newspapers.
5. Government-Owned Properties
When buying a home, the borrower can get a loan from the Department of Veterans Affairs (VA) or the Federal Housing Administration (FHA). If his property is foreclosed, it becomes the government’s own, instructing its brokers to sell it.
If you are interested in buying a house like this, you must contact a government-registered broker. You can find a person to contact on the website of the US Department of Housing and Urban Development (HUD).
Can I Participate in the Federal Program to Buy a Foreclosed House?
Yes, you are eligible to enter government programs, even to buy a foreclosed house if you are on a tight budget. These are the USDA Loan Programs 504 and 502 and the Veterans Administration Loan Program. Each of them has its own features to study, although a zero down payment, a reduction in the costs of closing the transaction, and an exemption from mortgage insurance are the expected benefits.
Can I Receive Mortgage Home Finance for a Foreclosed Property?
Banks’ skepticism about foreclosed property deals is explainable. However, you still have some financial options sponsored by the government, and you can take advantage of one of the following:
- 203 (k) Loans from the Federal Housing Administration (FHA). Loans are intended for purchasing REO at high risk. You can get money to buy and repair a home with a single mortgage. The shortfall in this funding is high-interest rates, mortgage insurance, and advance payments.
- Fannie Mae’s HomePath ReadyBuyer program from the Federal National Mortgage Association. This plan helps those who buy housing for the first time. This includes a mandatory homebuying education course and up to 3% in the closing cost assistance towards the FNMA foreclosed property deals.
- HomeSteps program through Freddie Mac. It is available just in 10 states where residents can get their benefits. For example, they don’t need to spend on mortgage insurance.
How Should I Attend Mortgage House Auctions?
So, you found an auction ad displaying the desired foreclosed property. The first and most important thing you must do is get there on time. Lay down all possible circumstances, including traffic jams and finding the correct address. These auctions are going fast, and you might just need a few minutes to miss your chance.
Besides, consider the list of documents that should be with you at the auction. As a rule, they include a government-issued ID and the funds for the purchase. However, you may find more information on the court office website or foreclosure listings.
Note that some lenders need just a down payment from the buyer, while others require full payment. The most common payment methods are money orders, cash, cashier’s cheque, and certified cheque. Personal cheques and other payments are not permitted or accepted.
For the first time, you may use a simple but effective strategy and arrive with several checks for different amounts at hand. If your offer wins, use the closest check, considering the amount. Do not worry if you overpay, as the extra money will be returned to you.
You can visit any auction if you lack confidence. Arrive there with no plans to buy – just see how they work and how bids are made.
One last warning: your winnings at the auction do not guarantee that the house will be yours at once. Homeowners can pay off debts and return their property if the sale of the foreclosed home runs through the grace period. However, this is in some states only, so make sure your metro area is not on this list.
Buying a foreclosed house is a hazardous activity that can turn out to be a tremendous benefit. However, if you are ready for serious research, complicated paperwork, and a long wait, this deal will be an excellent chance to hit the jackpot. Take advantage of finding foreclosed property and go ahead!