Would you like to take advantage of foreclosure real estate. If your answer is YES, read on
If you are looking to buy a new house, foreclosed properties can be quite attractive. You may easily find a listing that’s located in a neighborhood that would not be within your price range otherwise, but just because it looks like a great deal does not necessarily mean that it is indeed a great deal. Before shopping or writing an offer for a foreclosure, you must first evaluate your decision carefully. There may be risks involved here, so you might want to know about how different it is from a conventional real estate transaction, what options are available, and where to find them. Generally, buying a foreclosure entails quite an impersonal experience. Most likely, you will be communicating with the bank or lender that owns the property, and for them, it’s just plain business. If the figures are sensible to them, they’ll accept the offer, and if they aren’t then they won’t.
You should understand that there are multiple stages in a foreclosure process, and during these stages, the homeowner can fix the delinquency or a potential buyer can acquire the property. There are certain stages where you may get a better deal, although the risks are bigger. Meanwhile, in other stages, there’s minimal risk but at the expense of a bargain. Foreclosure properties are categorized as “distressed properties” – because of the owner’s financial situation, and because of the property’s condition. You can’t expect a foreclosure property to be all staged for a prospect buyer. It’s more likely that if the owners didn’t have enough money to pay the bills on time, then they probably weren’t able to make repairs or maintain the property well either. It is crucial that you understand what you are getting into.
The Types of Foreclosure Properties
The foreclosure process has various stages, and there are also various types of owners that may be in the possession of the property at the time of the transaction. You should know the type of foreclosure that you are dealing with since each type has its own caveats.
In this type of property, the homeowner still has control. Usually, in this case, the owner has been unable to make payments on time and probably negotiated with the lender to sell the property below its market value. This is commonly known as a “short sale.” Once the short sale agreement is signed, the owner vacates the property.
Potential buyers can already make an offer to purchase the property, but the lender has to agree with the owner to sell the property below its market value. Often, short-sale properties are in a better state than foreclosed properties because both the lender and the owner found a solution before any legal proceeding happens. This allows the seller to avoid foreclosure and thus the consequent credit history blemish, and it also offers the buyer a discount.
When properties don’t sell during the short-sale stage, they move into foreclosure. At this point, they will already be sold at auction. A neutral third party such as a sheriff or trustee usually conducts these auctions. What happens is that once the highest bidder makes the purchase, the liens are paid, and the homeowner receives any coverage. However, auctions tend to be limited only to investors and other lenders because they are usually cash-only. It is typical to not have the right to inspect the property when buying at an auction.
Real Estate Owned (REO)
If a property does not sell at an auction, then the lender will have full possession of it, and the property will become real estate owned. Real estate owned is the most popular way to purchase a foreclosure because it’s practically the most convenient and safest method. You might want to check with Karkanja if you are looking to buy a real estate owned property. Buying a REO property is more beneficial and a whole lot safe than buying at an auction because the lender is already often obligated to resolve any addition liens on the property. You can also expect the property to be clear and clean already.
You may find the best foreclosed homes with the help of real estate agents who specialize in these sales. Not only do they have better access to available properties, but they will also be able to guide you throughout the buying process.