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Purchasing foreclosed properties

Purchasing Foreclosed Properties

When a property owner fails to meet up to their monthly mortgage payments on time, the result is a foreclosure. During a foreclosure the lender takes over the property.

Foreclosure Process

There are several steps in a foreclosure process. Here is a look at what they are:

The first stage is a pre-foreclosure, wherein the property has not yet gone into complete control of the lender. As a buyer, when a property is on sale, in this stage, you can get a really good deal. You can buy it straight away from the lender and get a good discount, lower down payment amount and a sales agreement that shows some flexibility.

The second stage is foreclosure. You have to buy the foreclosed property at an auction, wherein you can still get the property at a reduced market rate.

The third stage is the REO or ‘real estate owned’ foreclosure. Here the property has a clear title and there is also less risk in buying such properties. This stage comes into effect, when this property has failed to sell in a foreclosure auction. It is also called a post-foreclosure stage.

Where to Find Foreclosed Properties?

Foreclosed properties cannot be found in usual property listings. You can find such properties being offered in Sheriff’s Sales, in foreclosed property auction sales, and through foreclosure notices in newspapers. You can also find them in Multi Listing Services (MLS). Yet another good source for such property sales is the internet. Check out sites such as foreclosurenet.net, neorealestate.com and so on

Whom to Purchase Foreclosed Properties?

Purchasing a foreclose property cannot happen from the property owner and hence you have to know from whom you should make this purchase. You can buy it from the U.S. Department of Housing and Urban Development when the foreclose property is sold through and auction.

How to purchase a foreclosed property?

Buying a foreclosed property is not the same as buying a regular property on the market. Here is a look into how to purchase a foreclosed property:

  • Look for foreclosed properties from different sources that offer such properties for sale.
  • Make a list of properties that you are interested in buying and find out their details. You can find good information on this at official government, county and state department sites.
  • Once you have details with you, short list properties which you feel are really good for checking out.
  • Go in person to see the properties. Carefully inspect them, find problem areas and compare with other similar properties in the same area.
  • Find out information on the owner such as unpaid taxes, repair work and so on, so that you know what kind of expenses you have to incur.
  • Assess if the property you seek really meets your budget. If the property was to come out at a foreclosure auction, make a bid for it, else submit your sealed bid to the lender

Making Payments on Foreclosed Properties

You can make payments for foreclosed properties by  making a payment during the auction, else making a payment in cash or cheque to the financial institution that is conducting the sales  privately.

Advantages in Purchasing Foreclose Properties

When you decide to buy foreclose you gain in the following ways:

  • You are able to buy a house at a price that is lesser than the market value
    You can avail a home loan on such properties
  • If you have a good credit rating and enough money to make the down payment, foreclosed properties are really the best option
  • Since cash payments are required in many costs matters related to property purchase, competition to buy the property is less. 
  • If you were to consider a foreclosed property that is in the REO stage, you have the benefit of getting a property with clear title and you an also get a home inspection done on the same.

Disadvantages of Buying Foreclosed properties

There are certainly drawbacks to buying foreclosed properties. Here is a look at what they are:

  • The process is a bit complicated and you do have to bear high pay-offs in such dealings
  • You might land up with a property that has some unpaid debts and taxes, which you have to clear up
  • When you buy a foreclosed property at an auction, you are not allowed any inspection
  • In the event that you buy a foreclosed property which is in the REO stage, you cannot expect to get any discounts
  • You should be ready to make payments in cash wherever necessary as this is the requirement in such purchases
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