Foreclosures are designed for lenders to recover any amount that they own on a defaulted loan by selling it. When buying foreclosures, you have to be aware that the process might be different in every state. However, there are 6 steps that you can take to buy foreclosures.
1. Do Your Research
You can go directly to the lender or an auction to buy a foreclosed home.
Get A Free Mortgage QuoteBuying Foreclosures at Auctions
Bidders at a live foreclosure auction are nearly always required to register and provide proof that they have the money to purchase the property in full.
Online sales are becoming more and more common. To locate foreclosure auctions in the region you wish to purchase, you can register with a website. Alternatively, you might look for county-specific foreclosure sales data online, in person at the county courthouse, or through the trustee (the independent foreclosure sales representative).
It is important to investigate the borrower's outstanding balance and any liens that may be placed on the property. Liens could need to be paid off by the winning bidder. It's a good idea to get title reports on homes you're considering bidding on from a real estate agent or title business.
Buying from Lenders
Listings can be found on multiple listing services or websites that compile homes in foreclosure. When you see the houses you like, note the name of the real estate agent. REO agents typically work alongside regular real estate brokers to locate buyers for the houses that banks have foreclosed on.
The prices of REO listings are frequently at or below market value. It's also helpful to know that before a foreclosure property is purchased, the lender often clears the title and evicts the inhabitants.
Pre-Foreclosures
Prospective purchasers collaborate with the borrower's real estate agent and the lender to determine an appropriate price if the lender approves a short sale.
In a pre-foreclosure, the lender may cooperate with the borrower to prevent foreclosure if they have missed three or more mortgage payments but are still the property owners. Another possibility is that, whether or not the house is advertised, the homeowner may accept purchase bids.
2. Get a Real Estate Agent
Find a broker whose specialty is foreclosure sales instead of choosing any old agent, even if you like them and have utilized their services for a typical house purchase.
Your real estate agent may assist you with price negotiations, ordering an inspection, and house searching. Your offers may also be challenged; an agent can advise you on the best course of action.
A real estate agent may also assist you with understanding the market as a whole and strategies to make the process of becoming a homeowner easier, such as first-time homebuyer programs.
3. Finding Foreclosures for Sale
As noted above, one may search for houses on free and paid websites. Foreclosed properties are offered by certain government agencies and lenders.
Real estate firms specializing in these properties are also available to assist you in your search.
4. Getting Pre-Approved for Mortgages
You should apply for a mortgage and be pre-approved if you want to move quickly to purchase a foreclosed property. In a pre-approval letter, pre-approval outlines the conditions of final mortgage approval and indicates how much you can borrow.
Having a pre-approval might make it easier for you to compete with all-cash purchasers of foreclosure properties.
Bonus: As you proceed through this phase, you'll probably gain knowledge on loan-to-value (LTV) ratio and other crucial house finance and purchasing topics. If you are researching for houses that have been repossessed, owner financing or a purchase-money mortgage will not be available.
5. Getting Appraisals and Inspections
Purchasers of REO properties should get a home inspection when buying foreclosures. A comprehensive inspection can help them track down problems and estimate the cost of house repairs.
An as-repaired valuation is the property's market worth if repairs are made and compared to comparable, and an as-is valuation often includes an assessment of an REO property. In addition, some lenders need a fair market value and a quick sale value.
If you believe the numbers in an appraisal are incorrect, you can dispute the findings and request an independent evaluation from a different appraiser.
6. Buying Foreclosures
To complete your loan, contact your mortgage lender if you choose to proceed. With the assistance of the real estate agent, submit your offer. You will sign the papers and transfer ownership if your offer is approved. It could be necessary for you to make an earnest money deposit.
It might take several days to finish the title certificate. In certain states, the initial borrower may be allowed to protest the sale within that period and pay the outstanding balance to keep their property ownership. It is unusual, but this is known as redeeming or repurchasing a home. However, it's a good idea to hold off on doing any maintenance on the property until you get the title certificate.
Get A Free Mortgage QuoteWhere to Find Foreclosed Homes?
Buying foreclosures means you have to find a great-value open that is being sold under the common market value.
Here are some main ways to find foreclosed properties:
- Print Magazines and Websites: Foreclosed properties are listed in local newspapers, bank offices, online real estate searches, print magazines, and various websites.
- A service for Multiple Listings (MLS): A home's foreclosure status might not be prominently shown in local multiple listing services; instead, it might merely be included in the property description.
- Websites for Foreclosures: A more direct way is to look through websites that specialize in houses and properties in foreclosure. A few banks, including Bank of America, also offer websites to look up foreclosed houses.
- Experts Real Estate Professionals: Never be afraid to question a real estate broker or agent about prospects since lenders are increasingly selling seized properties through them. Foreclosed homes are even a specialty of certain real estate agents.
Conclusion
And there you have it! Buying foreclosures is easy in just 6 simple steps! Do make sure to get in touch with a great real estate agent and do your research before signing anything.