Buying a foreclosure seems like a great deal. Prices are typically lower than comparable listed properties. The process can be more complex than purchasing a home on the market. You won’t be dealing with the homeowners but rather a bank.
There are advantages, but even if you can take advantage of them, buying a foreclosure requires effort, research, and patience. In this post, you’ll learn about the basics of purchasing a foreclosed home.
What is foreclosure?
A foreclosure occurs when a bank, mortgage company, or other lien holder seeks to take property from an owner to satisfy a debt. The bank or lender can take ownership of the property or attempt to sell it to cover the debt. The debtors lose all rights to the property.
For a lender, they have multiple foreclosures on the books at any given time. It’s rare that the lender will have much knowledge of the property and selling it isn’t a high priority. This lack of urgency is something to be aware of, hence the need for patience.
Unless you’re an expert in real estate law, it’s a product to seek the counsel of an attorney and/or real estate agent familiar with foreclosures. It’s not the kind of purchase where you want to be unprepared. There are three scenarios in which you could purchase a foreclosure.
At this point, the property owner has been given legal notice that the foreclosure process will begin. If the owner can’t get the loan back into good standing immediately, the only way to avoid a foreclosure is to sell the property before the mortgage holder takes it.
Buying a property in pre-foreclosure involves approaching the owner before the seller lists it. It’s all about timing. You could potentially save the owner from losing all his or her equity and getting a huge ding on their credit report. This will typically go quickly, so you have to be ready to buy.
If the owner loses the property, it will probably go up for sale in a foreclosure auction next. Successful bidders will pay cash at the time of purchase. There is usually little time to research the property beforehand.
A foreclosure auction offers some tempting bargains. However, the buyer assumes all risk of anything going wrong with the title, condition or any other aspect of the property. To make this purchase, it’s a big bet, which may or may not pay off.
Bank-Owned Property or Real Estate Owned (REO)
This situation is the one that takes the longest. If the mortgage holder takes ownership, they do want to resell it to recover the unpaid loan amount. They also happen to have a large list of properties to sell. Each of these needs ensuring the title is clear of defects and possibly doing some repairs to the property. Thus, as a buyer, you will have a lot of waiting to do. If you don’t have that kind of time, this buying a foreclosure isn’t for you.
Should you decide to take any of these paths to purchasing a foreclosure and need the assistance of a Raleigh real estate law firm, rely on staff at Moore & Alphin. Contact them today to talk about buying a foreclosure.