A foreclosure is simply a home that has gone through the legal process of repossession by the bank. The property then is disposed of through the asset management division of the bank or through a third-party asset manager. A short sale is when a homeowners property is worth less than what their mortgage is. They sell “short” by getting the mortgage lender to accept less than what they owe to clear the mortgage debt.
There are two ways to buy a foreclosure – through auction and on the open market. Until the home has completed the foreclosure process the homeowner has every opportunity to save the home, but once it’s over, the home is available for auction. Auctions are announced in local newspapers so you know when a particular home will be put on the block.You’ll have only a little time to drive by, and you will not be allowed inside as the home is not open to the market. Contact your real estate professional for advice. He or she will help you research foreclosed properties of interest, or you can go through the county records yourself to learn more.
At auction, the home goes to the highest bidder and the proceeds go toward the remaining mortgage debt. If you want to buy at auction, be prepared to bid against other investors on the courthouse steps and to pay cash for the home if your bid is accepted. Don’t let excitement rule you; stay within your planned maximum bid.
Real Estate Owned (REO) Properties
If the home doesn’t sell at auction, the bank takes the home back as an REO, or real-estate-owned property. From there the property is typically turned over to an asset manager and put on the open market. Once the REO is listed with a real estate broker, you can buy it just as you would any other listed property, with a mortgage loan if you prefer. But, be prepared for out-of-the-ordinary delays. Asset managers may be handling hundreds of properties in your area. They may be unresponsive to low-ball offers, or refuse to negotiate at all. Their job is to get the most return possible for the bank.
If you have questions on Foreclosures or any part of the home buying process please, Don’t hesitate to Contact Me!