Foreclosures need more study, paperwork and legwork than any other real estate purchase. They are not the perfect park for first-time buyers. They are the emerging markets of real estate: potentially lucrative, but complicated and volatile. You will find a buy house for 60 or 70% of its market value, but you can also waste a great deal of money and time and wind up with nothing to show to them. There are three stages in which you are able to purchase a foreclosure: during pre-foreclosure, in an auction house and as a bank-owned property, also called a real estate owned (REO) property. Each phase calls for a different approach.
Pre-Foreclosure
Look for a foreclosure. Get the owner and address contact details. There are numerous online foreclosure listing sites, such as Foreclosure.com, Foreclosures.com and RealtyTrac.com. They allow you to filter your search by area, price or even number of bedrooms. You could also find foreclosure listings in county recorders’ or clerks’ offices. They are also promoted in newspapers and public places as part of their legal measures a creditor should take to foreclose on a house.
Speak to the owners. Be tactful and try to build a relationship with them. They are going through a distressing situation and may not even understand their home was showcased in a public foreclosure list. At the pre-foreclosure stage, homeowners have fallen behind on their mortgage payments and received a notice of default from the lending company. From then, they have three months to make up for the default on the mortgage prior to the creditor schedules a foreclosure sale.
Make an offer. If the owners cannot afford their mortgage, they may accept a low offer that insures their mortgage balance, so as to prevent a foreclosure. If your offer is for less than the mortgage balance the sale is regarded as a brief sale. Lenders must approve a brief sale before it could go ahead.
Foreclosure Auctions
Find out how the auction process works in your county. Speak to a experienced real estate agent or a foreclosure lawyer. You can also ask the regional county recorder’s or clerk’s office for information. In California, foreclosure sales are held business days from 9 a.m. to 5 p.m.. You are not permitted to look at the property prior to bidding, everyone can bid, and the foreclosure could be postponed to a different time and place from the trustee handling the sale. Some counties need sealed-envelope bids, others ask that you bring your bid amount in cash or in cashier’s checks. So ensure your finances is arranged ahead.
Attend the auction. The time and place will be on the foreclosure list or on the advertisement from which you found out about the sale.
Make a bid. The highest bidder takes the property. In California there are two varieties of foreclosures: non-judicial and judicial. The non-judicial path is definitely the most used. In non-judicial foreclosures the auction house is final. But with judicial foreclosure the previous owner has up to one year to redeem his house by paying off the foreclosure sale and interest and any additional expenses incurred by the lending company.
Bank-Owned Properties
Look for REO properties. Lenders usually use real estate brokers to market their properties. You are able to find a real estate broker online at REO Network (see Resource section), which represents over 8,000 brokers.
Be Aware of the Cost. REO properties are the simplest and safest foreclosures to purchase, but you stand less chance of finding a bargain. Lenders usually cost REOs in the market price or just below.
Make an offer. Start low. If the creditor has a large inventory of REOs in its portfolio, you may end up on the ideal end of a bargain after all.