Buying a foreclosed house can come with a lot of benefits. These homes tend to be relatively cheap and can end up having a lot of hidden value. However, they can also be money pits that can leave you in debt and financial pain.
Before the housing crisis of 2007 to 2009, it was fairly difficult to find a foreclosed home to buy. The housing market was super hot and people were buying homes like crazy.
It’s much easier to find these homes today. But now that the financial crisis occurred, many people are hesitant about buying such a home.
Are you interested in buying a foreclosed home? If you are then you have come to the right place. In this article, we will take you through the top tips that you need to know when you are interested in buying a house that has been foreclosed upon.
1. Know How to Find Foreclosed Homes
A foreclosed house can be found in multiple listing service (MLS) sites and periodicals. You can also find them through local newspapers, bank sites and offices, and online real estate browsers.
In local MLS platforms, you might have a hard time finding the foreclosure status of a house.
An easy way to find a foreclosed house is to visit sites that specialize in houses that have been foreclosed upon. This includes Fannie Mae’s HomePath.com.
Some banks also provide pages that help people search for houses that are foreclosed.
Lenders are also selling seized assets with the help of real estate agents. So you can also your local real estate agent or broker for information.
In fact, you can find real estate agents who specialize in these kinds of homes. And if you’re in the Chicago area, you can go and find foreclosed homes that way.
2. Know the Types of Foreclosures
There are several different types of foreclosures. Let’s go over them below.
If a property is in pre-foreclosure then the mortgage lender has notified the borrowers that they are in default. However, the property has not been put up for sale at an auction yet.
If the owner of the property can sell the home during this time then they might be able to avoid the actual foreclosure.
These kinds of homes are usually listed in city and county court buildings.
A short sale takes place when a lender is willing to take less money for a property than what’s owed for the mortgage. A borrower doesn’t need to be in default for this kind of sale to take place. However, they usually have to prove some kind of financial difficulties, such as losing a job.
Usually, the home is worth less than what is left on the mortgage balance. In order for a home to qualify for a short sale, the lender needs to agree to sell the home by taking less than what they are owed.
When you buy a home as a short sale, it is usually the same as buying a regular house. However, the language in the contract will be different. A bank can take a long time to respond to this kind of offer so the process will likely take longer than buying a traditional home.
Sheriff’s Sale Auctions
This kind of auction is going to take place when the lender has told the borrower about the default. They then can allow a grace period for the homeowner to catch up on their mortgage payments.
An auction is meant for the lender to quickly get paid back for the loan.
These auctions usually take place at the city courthouse and are run by the local police. The home is auctioned to the highest bidder.
A house that doesn’t sell at the auction is going to go back to the lender. This means that the bank is now going to become the owner of the property.
Some houses are bought by loans that are guaranteed by the federal government’s Federal Housing Administration (FHA). The loan might also come from the Department of Veterans Affairs (VA).
When these homes are being foreclosed upon, they will be repossessed by the government and sold by people who work for the federal government.
3. Know the Risks of Buying Foreclosed Houses
Obviously, foreclosed houses are attractive because they are so cheap. However, that doesn’t necessarily make them good deals.
A foreclosed house could be in very poor condition. When a homeowner knows that the home is going to be repossessed, they lose the incentive to keep their home in good condition.
They might not fix leaks, patch holes, repair electrical sockets, and more. They might even vandalize the home out of spite.
There also might be hidden costs associated with the property. You want to make sure that you won’t be on the hook for things like tax liens.
Use These Tips You Need to Know When Buying a Foreclosed House
Hopefully, after reading the above guide, you now have a better idea of what to do when thinking about buying a foreclosed house. As we can see, there is a lot to consider when thinking about purchasing a home that is being foreclosed. However, if you do your due diligence, you could end up with a great deal on your hands.
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