First, What is Foreclosure? Foreclosure is the process in which a bank or investor tries to recover any unpaid amount on the loan by either taking possession or selling the property. As you may already know, banks are not in the "home owning business". They are in the deposits and lending business. When a property is foreclosed upon, the bank doesn't look at the situation as "I've got a home valued at $200,000.00, but only $150,000.00 outstanding on it.", they look at it as "I haven't seen the $1300.00 interest payment in 3 months, I need to get that money back and loan it to someone who will pay the interest"
So, you can see where there may be some opportunity, as a buyer, to purchase a home at a discount. However, you should be well versed on market conditions, strategies, and risks of purchasing a foreclosed home before a transaction of this type. But for the purposes of this post, lets look at the options on "how" to purchase a foreclosed home.
There are 3 opportunities to purchase a foreclosed home:
During Pre-Foreclosure
At Auction
Purchasing a Bank Owned (REO)
Purchasing a home during the pre-foreclosure stage is exactly as the title indicates. You approach the a homeowner that may be having difficulties meeting their mortgage obligation. You offer to buy the home outright. In this scenario, the homeowner may have an opportunity to walk away with some of the equity in the house, and avoid any derogatory marks on their credit. The buyer may be able to purchase the home well below the market value
When the home has reached the Auction Stage, buyers have the chance to bid on the house at public auction. Buyers are usually required to pay cash for the property. This leaves little chance to inspect the title work of the property and the home itself, but this is where you can find some of the best bargains.
If the lender was unable to resolve the issues with the original homeowner, and was unable to sell the house at auction, then the lender will assume ownership of the property. Usually, the lender will try to sell the home as quickly as possible to recoup any defaulted amounts and costs associated with the foreclosure. In many cases, as a foreclosure buyer, have missed a window of opportunity. Because, by the time it reaches this stage in the foreclosure process, your less likely to find as large of savings as you would have in the earlier stages.
So, if you have considered searching out foreclosure homes, you should definitely do your homework. They can be a risky transaction but lucrative.
So, you can see where there may be some opportunity, as a buyer, to purchase a home at a discount. However, you should be well versed on market conditions, strategies, and risks of purchasing a foreclosed home before a transaction of this type. But for the purposes of this post, lets look at the options on "how" to purchase a foreclosed home.
There are 3 opportunities to purchase a foreclosed home:
During Pre-Foreclosure
At Auction
Purchasing a Bank Owned (REO)
Purchasing a home during the pre-foreclosure stage is exactly as the title indicates. You approach the a homeowner that may be having difficulties meeting their mortgage obligation. You offer to buy the home outright. In this scenario, the homeowner may have an opportunity to walk away with some of the equity in the house, and avoid any derogatory marks on their credit. The buyer may be able to purchase the home well below the market value
When the home has reached the Auction Stage, buyers have the chance to bid on the house at public auction. Buyers are usually required to pay cash for the property. This leaves little chance to inspect the title work of the property and the home itself, but this is where you can find some of the best bargains.
If the lender was unable to resolve the issues with the original homeowner, and was unable to sell the house at auction, then the lender will assume ownership of the property. Usually, the lender will try to sell the home as quickly as possible to recoup any defaulted amounts and costs associated with the foreclosure. In many cases, as a foreclosure buyer, have missed a window of opportunity. Because, by the time it reaches this stage in the foreclosure process, your less likely to find as large of savings as you would have in the earlier stages.
So, if you have considered searching out foreclosure homes, you should definitely do your homework. They can be a risky transaction but lucrative.
No comments:
Post a Comment