HOW TO BUY A FORECLOSURE
A foreclosed home is put up for sale when the previous homeowner isn't able to stay on track with timely payments. In most cases, the bank holding the mortgage will work with the homeowner to help them avoid losing their home. It's only when the homeowner doesn't make payments that the bank will decide foreclosure is the only option.
Reasons for Foreclosure
There are many reasons why a homeowner might miss their mortgage or loan payment. The homeowner could have lost his/her job, run into medical problems, or not budgeting properly, so that they can't afford to make the necessary payments. While there could be various reasons a homeowner misses mortgage payments, the only reason for foreclosure occurs when the loan is not being paid off. In a foreclosure, the bank or lending company will force the owner out of the home, so that it can be sold to help cover the bank’s costs.
Procedure for Previous Owner
Once a homeowner has gone 60 days without making their mortgage payments, the bank or lending company will send them a notice stating that they have 90 days to rectify the situation, and if they don’t, they'll face foreclosure. If they haven't paid the mortgage in arrears, they will receive a 30 day notice on their door or in the mail that their house will be sold at auction. This notice will appear in the local newspaper as well. After the auction, the previous homeowners must move out of the home.
Process for the New Buyer
When thinking about how to buy a foreclosure, it is important to consider the process the new buyer must go through. The buyer of a foreclosed property can purchase the home at an auction or through a real estate agent depending on how the bank wants to proceed with the sale. The home is typically priced at a fair market value, but the bank won't know the state of the home or its property before the sale. Home buyers will want to have their own inspections done to ensure they are not buying a property with structural issues. Unfortunately, a home that is foreclosed on might not always be in the best shape. The previous owner didn't have money for the mortgage, so they might not have had the money for repairs either. The bank won't have any property records or maintenance paperwork for the property, and the sale of the property is often as-is. This means that once the home is paid for, the bank is not responsible for any repairs.
How to Find a Foreclosure
If you're wondering how to buy a foreclosure, you can use a real estate agent to find foreclosures in your area or you can search online for auctions. You could search the local newspaper for notices about upcoming foreclosures as well. If the property is sold at auction, there won't be any time to see the property or have an inspection done. Foreclosure auctions are usually done quickly with many homes being sold at once. It's important to set a firm maximum price that you would pay before arriving at the auction. Excitement and competition can drive up the bid price of a home quickly, and you must be sure that you adhere to your budget.
Unless you're extremely experienced with foreclosed homes, it's often best to take the advice and guidance of a real estate expert when deciding how to buy a foreclosure. This person will have experience with foreclosed homes, and he/she will know the right price for properties based on an extensive knowledge of the field. If you want to risk purchasing at an auction, make sure you're willing to take a gamble on a property without seeing it first hand.