What is a foreclosure?
As defined by Wikipedia…Foreclosure is the legal process in which a bank or other secured creditor sells or repossesses a parcel of real property (immovable property) after the owner has failed to comply with an agreement between the lender and borrower called a “mortgage” or “deed of trust”. Commonly, the violation of the mortgage is a default in payment of a promissory note, secured by a lien on the property. When the process is complete, the lender can sell the property and keep the proceeds to pay off its mortgage and any legal costs, and it is typically said that “the lender has foreclosed its mortgage or lien”.
Where do I find foreclosed properties?
You can search for all pre-foreclosed and foreclosed properties that are listed in the MLS.
Is buying a foreclosure just like any other property?
The procedure for buying a foreclosure that is listed in the Multiple Listing Service is much the same as any other property. The seller is typically a bank or a third party company that the bank has designated to handle their foreclosures. But here are a few differences you may encounter:
- Most foreclosures will require that you close within 30 days.
- Most foreclosures are sold in as is condition. Property inspections are of particular importance in a foreclosure sale. Many times the previous owner has removed fixtures or left the property in some state of disrepair.
- Your offer may take some time to get a response. Since you are dealing with an absentee owner, your offer may take some time to be accepted or counter-offered and the response may be verbal. Some offers may require an approval from a higher source before it can be expected. The best way to proceed in making an offer is to make your contract as straightforward as possible.
- Some foreclosures may be done on special contract forms or require special addenda. Ask for samples of these forms when you see the property so that you will be prepared when you make your offer.
- Many foreclosures will ask for your financing information prior to accepting the offer.
What if the property is listed as “pre-foreclosure”?
When a property is listed as “pre-foreclosure” it means anything from a homeowner has missed a payment or two or the property already has a lis pendens which means a lawsuit on the property has been filed. Since the foreclosure is not complete, the process to purchase may be a little less defined and could take a bit more time to purchase.
What is a short sale?
When a property owner owes more on their mortgage than the property is worth, the listing may be deemed a short sale. In some short sale cases, the property owner may be current on the mortgage and just needs to sell. How the short fall is handled can vary depending on the financial circumstances of the property owner. It is certainly of the utmost importance to know how much is owed on a short sale and how the deficit will be handled. In cases where the mortgage holder may be willing to negotiate the deficit, be aware that there may be a significant time delay from the time you make an offer until you know you have a contract. In some cases this can be months instead of days. If you want to purchase a short sale, make sure you factor extra time into your equation.
Is financing available for foreclosed properties?
Yes, there is financing available for foreclosed properties. With the FHA limits increased in our area to $423,750, FHA loans are a great source to buy that foreclosure with a small down payment. If the property needs rehabilitation, FHA also has a loan that will allow you to finance the improvements needed to fix up the property. Conventional loans are also available as long as the property is in decent condition. It is always a good idea to speak to a mortgage loan officer before making an offer to see what options are available.
Do you have any other questions you would like answered? Click here to send an email.