The Home Buyer's Korner

Information presented should be used for educational purposes only.

September 21st, 2014

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Buying a Foreclosed Home

Home buyers often ask if foreclosures are really good deals and the answer is inevitably “YES”, but you need to know how and where to find them. Shopping for a foreclosure isn’t complicated at all if you employ an experienced real estate agent. Financing the purchase and renovating doesn’t have to be complicated either, but that take a knowledgeable mortgage lender and more often than not a professional general contractors. 

There’s several major websites we’ve included in our blog and Google+ Communities that list foreclosure properties in your area.  Be warned however, although their great website to get started checking out this market information comes from public records and everyone else it looking at them too.  Records aren’t always updated and you might inquire about a dozen foreclosures before you find one that’s actually for sale. Unless a listing is clearly marked, “For Sale” and it includes an MLS (Multiple Listing Service) number, it is probably not available.

I recommend you study up a little on just how foreclosures work in your state.  To do that you need to talk with an experience local real estate agent, but I help you get started with some of the basics.

  1. There are two types of foreclosures — judicial and non-judicial. A judicial foreclosure goes through the court. A non-judicial foreclosure doesn’t.  Some states require that all foreclosures be judicial; others set forth procedures for non-judicial foreclosures. Whether a foreclosure is judicial or non-judicial is significant. It affects the foreclosure process and procedures, how the previous home owner can raises defenses, and often whether they’ll be liable for a deficiency after the foreclosure sale. 
  2. When a home owner falls behind in payments (usually two or three months), a lender will file what is known as a ‘Notice of Default.’ This is a warning, and it is a public document. Because it is a public document many websites like Zillow picks up those notices and publish them to give people an advanced look at what might be coming onto the market.
  3. The home owner normally has three months from the time the Notice of Default is served to make satisfactory payment arrangements or sell the home.
  4. After three months, the foreclosure trustee/attorney can sell that property at a public auction, usually held at the county courthouse in which the home is located. A ‘Notice of Sale’ must be published no less than 10 days before the sale is scheduled. You might see foreclosure auctions listed on Zillow, but these dates change often as lenders work with current home owner cure their default.
  5. If the home owner can satisfy the lender the home is sold at auction. Most often the lender will purchases and does one of five things:
  6. list it on the MLS for sale
  7. sell it to another bank
  8. sell it in a private transaction to a private buyer
  9. list it on a specialty website
  10. holds it in inventory when the market is overstocked with properties and list it at a later date

There are several ways to buy a foreclosure home and a real estate agent who’s a network member of our blog can certainly assist you.

  1. When an individual decides to sell through a short sale, an experienced short sale real estate agent can facilitate that sale. A short sale means the lender is willing to take less than is actually owed, so the home can be sold to a new buyer before it is foreclosed. This usually happens after a Notice of Default is filed and saves the bank thousands in legal expenses. The home owner is saved from foreclosure and the bank saves on legal expenses and third party fees, while the new home buyer gets a great deal on the home. Many real estate agents work exclusively, listing these types of properties and can help people buy them when they’re listed.
  2. When a lender purchases a home back at auction and lists it on Zillow or in on your local MLS a real estate agent will know about it first and assist you with offering the right price to purchase it.
  3. When a home foreclosure is handled through the Federal National Mortgage Association (FNMA), the United States Department of Housing and Urban Development (HUD) or United State Rural Development (USDA) the home is listed at their websites and we’ve included them both just below this post. Homes are also often listed at your local MLS website and with your real estate agent you can place a bid in just a few minutes. All homes on these websites are for sale. HUD and USDA take the highest net bid, end of subject! But, it’s great way to buy a home because they can be bought with very little or nothing down; with terms that aren’t complicated.

FNMA FORCLOSED HOMES

HUD FORECLOSED HOMES

USDA FORECLOSED HOMES 

You can also purchase a foreclosed home by:

  1. Attending a public foreclosure auction. However, many of these auctions require significant down payments with the remaining balance owed within a day or two after a home is sold. And, more often than not you’re bidding against a number of highly skilled property investors. Personally, I wouldn’t be inclined to take this option. Real Estate Agents don’t usually represent home buyers in this process because a commission seldom involved.
  2. You can approach a bank directly about bank-owned foreclosed homes, but again it’s going to take a lot of work finding who to call and some banks won’t work with you directly.

If you’re interest in a great deal take some time and learn them by reading more at our blog and then contact a local network member to get started.

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