Do Research Before Buying a Foreclosure Home
There are 3 basic ways to buy a foreclosure:
- Pre-foreclosure
- Auction
- From the bank (REO)
With a pre-foreclosure, the owner of the home has received a notice from the lender that foreclosure proceedings have started and they have 20 days to “cure” the deficit before it is posted at the courthouse. At this point, the homeowner/borrower is typically very motivated to sell the house and receove some of the equity and escape from debt. If the homeowner fails to cure the loan, the property is posted at the county courthouse and auctioned off.
Many foreclosed properties fail to sell at auction and end up in the hands of the bank or lender, in which they are called REOs, or real-estate owned properties. These transactions are very similar to traditional real-estate transactions although these homes are usually sold “as is” with no fixes.
How do you find foreclosures?
There are plenty of online foreclosure listing sites. Some of the sites offer their information for a fee, some for free and others offer information for free for an introductory period but will charge a fee for long-term service.
Sites include:
How can I reduce my risks?
The best way to protect yourself if you are thinking of buying a foreclosed property is to do your homework. Be cautious at every step.
If you work with a real-estate company that specializes in foreclosures, you can save yourself a lot of headaches, Bickers says.
Buying a house at auction is the riskiest proposition, and it’s essential that you school yourself on this process, perhaps attend an auction or two before you even begin scouting houses, Bickers suggests.
Drive by the house you are thinking of buying. If you can get permission from the owner to see the inside, do so. The owner does not have to let you inside, however.
Do a records search to uncover any liens on the house. Repeat the search right before the purchase.
