Buying Forclosed Property
Bookstores are full of books purporting to help people “buy foreclosed properties at discounted prices”. An equal number of websites promise bargains in hot markets, or promote “lists of properties in foreclosure” for a fee. In reality, there are good buys for those who are willing to work at it, but the process of locating properties and working through the legal and emotional entanglements is not for the faint hearted.
For those hoping to find a true bargain in real estate by purchasing a foreclosed home at auction, there are some important points to keep in mind.
- Finding Properties to Purchase
- Statistics have often shown that a very low percentage of recorded NODs/Trustee Sales result in the owner actually losing the home to foreclosure. Consequently, there are plenty of agents and professional foreclosure specialists seeking the same properties.
- NOD/Notice of Trustee Sale lists are available from information service providers or in adjudicated newspapers where they must be published before a sale can take place. Prepare to spend several hours a week doing research of public records and act fast.
- Ask your professional sphere of influence (such as mortgage brokers, attorneys, insurance agents, tax specialists, and accountants) to keep an eye out for possible foreclosure situations.
- Run ads that may attract the eye of people who must get out from under a home loan, such as “I buy houses”.
- Search the newspapers. Look for classified ads that say “must sell”, “vacant”, “motivated”, or “lost job”.
- Watch for HUD auctions, but don’t expect to be the only one in line.
- Other Tips from the Experts
- If you want to negotiate a pre-foreclosure sale, remember that property owners who fall behind in their mortgage payments are frequently unable to properly maintain the home, and phones and electricity may be shut off.
- roperties sold at foreclosure sales and auctions are sold “as is”, and must be repaired, often at considerable cost, before they can be resold on the market.
- Potential buyers of auction properties may not have the opportunity to inspect the property before purchase.
- Foreclosure properties may also be encumbered by tax and other liens,
which become the responsibility of the owner after a foreclosure sale.
It is likely that these homes cannot be covered by title insurance, so
research, research, research is the key to uncovering the secrets of a
foreclosed property before purchase.
The safest bet for those new to the process is finding REO properties (properties that have been taken back by the lender). They have been cleared of liens and taxes, and any tenants have already moved on. Most large lenders have departments who deal with this type of property.
