Some analysts predict that the number of foreclosures is going to increase. While the housing market remains strong, the coronavirus shutdowns had a significant impact on the economy and unemployment is still high.
It’s important to prepare for the process if you’re looking to see if a foreclosure is a good deal. The process of buying a foreclosed home is similar to that of buying any other house. However, if you know what to expect you can streamline the buying process.
Types of Foreclosures
There are two types of foreclosed houses. There are two types of foreclosed homes: bank-owned and real estate owned properties (REO). In both cases, the lender is the owner of the home. The main difference between the two scenarios is the stage at which the foreclosure occurs.
In the middle of foreclosure, the homeowner has stopped making payments and the lender is taking action to remove them from their home. Foreclosed properties are bank-owned homes that go to auction. REOs are still bank-owned homes if they don’t sell. REO properties are those that have been auctioned but still haven’t been sold. The lender will try to sell the REO properties through their REO agent.
Foreclosures are often cheaper, and in some cases significantly less expensive, than comparable properties in the same area. Many foreclosures are priced well below the market value. You may also receive other benefits by purchasing a foreclosed house, such as lower rates of interest, reduced down payments and the ability to avoid appraisal fees and certain closing costs.
You can get a great deal on a distressed home that is not owned by a bank.
Pre-foreclosure is one example. The lender will let the borrower that they are in default. However, if they can sell their property, they may be able to avoid foreclosure proceedings. Short sales occur when a lender accepts less than the amount owed on a loan for a home. A lender can approve a short-sale even if you are not in default.
There are also properties owned by the government. When a property purchased with a government-backed mortgage defaults, the federal government will own it.
Buying a Repossessed Home
Here are the steps you should take if you want to purchase a foreclosed property:
Mortgage Preapproval
You should get a preapproval from a lender for a mortgage before you begin looking at foreclosed homes. Preapprovals show that you are serious about buying and will help guide your search.
Find a Foreclosure Agent with Experience
It’s crucial to have an experienced agent who is familiar with foreclosures on your side. They can help you find properties in your area if you don’t already have a property in mind.
Make a Competitive Offer
You don’t need to be competitive just because you found a property that is in foreclosure. You are likely to get a good deal, but making an offer that is too low can result in it being rejected.
Get an Inspection
You can buy foreclosures as-is. The seller will not make any repairs. If you purchase the property, any repairs that are needed will be your responsibility. You need to be aware of what you are getting into before you make an offer. If you are not comfortable with the property after an inspection, you should pass. The inspection is merely to help you decide. What’s found won’t be much of a bargaining tool.
You won’t be able to inspect the home you purchase at auction.
You can’t usually go inside a house before you buy it at auction.
The Risk to Buyers
A foreclosed house comes with a lot of risk. You may not discover hidden costs and problems until after the inspection. It’s a long process.
When buying a foreclosed property, there is a lot of paper work. Banks are slow to respond with these properties. If a bank is backlogged with foreclosures, they can take several months to respond to an offering.
All of this does not mean that buying a foreclosed property is not a good idea. You just need to be prepared for these obstacles.
Original Blog: https://realtytimes.com/consumeradvice/buyersadvice/item/1039976-what-s-the-process-to-buy-a-foreclosure?rtmpage=null
