by John Foreman and Lead Foreclosure Specialist J.B. Allen (10+ Years of REO Sales Experience)
Over the last several years the term foreclosure has become more widely known and researched by people looking to buy a home. Most often this is done by people hearing that you can get a wonderful deal on a property that has gone through the foreclosure process.
What does foreclosure mean:
According to the Merriam-Webster Dictionary foreclosure is a legal proceeding by which a borrower's rights to a mortgaged property may be extinguished if the borrower fails to live up to the obligations agreed to in the loan contract. The lender may then declare the entire debt due and owing and may seek to satisfy it by foreclosing. Foreclosure is commonly by a court-decreed sale of the property to the highest bidder, who is often the lender.
It is in fact true that you can potentially get a wonderful deal when purchasing a foreclosed property. This is because the current owner, most often the bank that originally lent money to the previous owners, is looking to recoup what is still owed to them. Foreclosures are typically listed under the acronym REO, which stands for Real Estate Owned, and basically means that it is owned by a bank. Foreclosures can be a great deal, but there are many things to look out for and be aware of.
The selling banks are responsible for all back taxes and liens on the property. These are not the responsibility of the buyer.
More often than not foreclosed property have some form of damage, which can range in degree. The cost of these repairs should be noted when making an offer and ultimately purchasing a foreclosure. Banks will be selling these properties "AS IS" and it should NOT be expected for the bank to provide compensation for any repairs/maintenance.
When looking to purchase a foreclosure be sure to get pre-qualified by a lender if you plan to finance the purchase, as the selling bank will want to see this when an offer is made. When making an offer on a foreclosure where cash is being used to cover the purchase price, the bank will also require seeing proof of these funds.
If you don't have the cash on hand for needed repair work there are various loans available that can have these additional costs built in. We would be more than happy to refer you to lenders that will accommodate your needs and desires. When purchasing a foreclosure certain financing options may be out of the question depending on the condition of the property.
A foreclosure may or may not be for everybody, but our expertise with foreclosures and in real estate will find the perfect home or investment property for you
Selecting the proper agent in any real estate sale is crucial. If you are interested in purchasing a foreclosure or would you like more information please contact us. We understand the foreclosure process from beginning to end.