Everything You Need to Know Before Buying a Foreclosed Home
Coronavirus has been negatively impacting the American economy for nearly a year now. As a result, foreclosures are on the rise, with some experts estimating an increase in foreclosures by nearly 70% over the next two years. This could drastically increase buying options for many, so it is crucial to know the facts about these homes before making such a significant decision. Keep reading below for several tips to consider when looking to purchase a foreclosed home.
Where to Find Foreclosed Homes.
There are two ways to purchase a foreclosed home, either at auction or through a real estate company. A house goes up for auction when the bank first forecloses on the house. This can be convenient but risky since properties sold at auction cannot be inspected or toured before purchase. If a house is unable to be sold at auction, it then becomes real estate owned. Purchasing an REO home is similar to acquiring a traditional property in the sense that the potential buyer is allowed to see the home and perform inspections before purchasing. Obtaining an REO home can be a long process, but can be beneficial as foreclosed homes are typically sold “as-is” and it’s essential to see what you’ll be getting into. If buying a foreclosed property is something you’re interested in, you can either find them often listed at county and city courthouse buildings for auction while REO properties can be found on various online home sale platforms.
Understand the State of Foreclosure.
Homes can be in various states of the foreclosure process and it is important to know which stage your potential home is in, as it can impact the process. Listed below are the five stages of foreclosure and how they can affect your buying experience.
● Pre-foreclosure: This phase occurs when the lender has notified the homeowner of the pending foreclosure, but the property has not yet been offered at auction. If the homeowner can sell the house before it goes to auction, they are sometimes able to avoid the negative effects that come with the foreclosure process.
● Short sales: When the lender accepts less money from the borrower than what the mortgage states, a short sale occurs and often happens because the property is worth less than what is owed on the mortgage. Short-sale purchases are similar to regular ones, but can often take longer to process and contract language will differ.
● Sheriff’s Sale Auctions: This phase occurs after the borrower has been given time to make up the mortgage payments but is unsuccessful. If purchasing a home at a public auction, the property will go to the highest bidder so the lender can be repaid quickly.
● Bank-Owned Properties: When houses are not sold at auction, they become bank, or real estate, owned properties. Purchases of these properties then become similar to traditional home sales.
● Government-Owned Properties: This occurs when the home is purchased with a loan from the government. When foreclosed on, the government can regain the home, and those looking to purchase it must go through a federal broker.
Know the Risks.
When working with a real estate company, it’s important to do a home inspection and take note of any needed repairs, as repair costs always become the responsibility of the buyer. If repair costs are higher than you would like to pay, be sure to discuss the costs in your offer, so you can walk away from the sale in the event the seller is not willing to help with repairs. Additionally, be sure to perform a title search before buying a foreclosed home. Occasionally, foreclosed homes can be sold with liens attached and the new owner will be responsible for all debt associated with the property. No one wants to purchase a new home with debt already attached to it. Lastly, it is significant to note that competition can be high for foreclosed homes as smart buyers will bid on multiple homes at once to increase their chances of a successful purchase.
Work with Trustworthy Agents.
No matter what stage of the home-buying phase you are in, be sure to partner with trustworthy sellers and agents, like our agents here at Points West Agency. Additionally, scammers often take advantage of those going through the foreclosure process, so it is essential to be aware and trust the help you are receiving.
With the financial stress caused by the COVID-19 pandemic, it has never been easier to find a foreclosed home for sale. While this can be an exciting transition for many buyers, be sure to consider these tips before purchasing. Our agents are ready to help you find the foreclosed home of your dreams, so visit our Contact Us page or give us a call at (817) 717-6036 to get the process started.