While foreclosure activity is dropping in most major cities, there are some metropolises where foreclosed properties still account for too large of a percentage of homes on the market.
Here’s the question for home buyers: Do high-foreclosure markets actually represent an opportunity? Do these cities give buyers a chance to get into city neighborhoods that they otherwise might not be able to afford?
Yes, they do. But buyers have to be careful: Purchasing a home that is in foreclosure can lead to big problems.
Home buyers who want a good deal in real estate invariably think first about buying a foreclosure. They think, sure, I’ll do a little work to get a cheap price. They believe banks are desperate to dump these awful homes, and that’s not true, either.
Some well-meaning buyers have this picture in their mind of a cute little house, surrounded by a white picket fence that is owned by a widowed mom who fell on hard times, but that scenario is generally far from reality. The real picture is often ugly.
The homeowner either abandoned the home or voluntarily deeded the home to the bank. You will hear the term the bank taking the property back, but the bank never owned the property in the first place, so the bank can’t take back something the bank did not own. The bank foreclosed on the mortgage or trust deed and seized the home. There is a difference.
A foreclosure is a home that belongs to the bank, which once belonged to a homeowner.
Sellers stop making payments for a host of reasons. Few choose to go into foreclosure voluntarily. It’s often an unpredictable result from one of the following:
- Laid-off, fired, or quit job
- Inability to continue working due to medical conditions
- Excessive debt and mounting bill obligations
- Squabbles with co-owner, divorce
- Job transfer to another state
- Maintenance issues they can longer afford
During the market crash from 2005 through 2011, many homeowners simply walked away from their homes because the values had fallen and they owed more than their homes were worth. This was not the best solution, in most cases, but it was immediate relief for homeowners.
Negotiating Directly With Sellers in Foreclosure
Investors who specialize in buying foreclosures often prefer to purchase these homes before the foreclosure proceedings are final. Before approaching a seller in distress, consider:
- Foreclosure proceedings vary from state to state. In states where mortgages are used, homeowners can end up staying in the property for almost a year; whereas, in states where trust deeds are used, a seller has less than four months before the trustee’s sale.
- Almost every state provides for some period of redemption. This means the seller has an irrevocable right during a certain length of time to cure the default, including paying all foreclosure costs, back interest and missed principal payments, to regain control of the property. For more information, consult a real estate lawyer.
- Many states also require that buyers give to sellers certain disclosures regarding equity purchases. Failure to provide those notices and to prepare offers on the required paperwork can result in fines, lawsuits or even revocation of sale.
- Determine whether you’re the type of person who can easily take advantage of a seller’s misfortune under these circumstances and/or put a family out on the street. Oh, critics will argue it’s just business and sellers deserve what they get, even if it’s five cents on the dollar. Others will feign compassion and trick themselves into believing they are “helping” the homeowners avoid further embarrassment, but deep inside yourself, you know that’s not true.
Buying a Home at the Trustee’s Sale
Check with your local county office to find out how sales in your area are handled, but common denominators among those are:
No loan contingency
Proof of financial qualifications
Sizable earnest money deposits
Purchase property “as is”
Sometimes buyers are not allowed to inspect the house before making an offer.
WARNING: The problem with buying a house sight unseen is you can’t calculate how much it will cost to improve the structure or bring it up to habitable standards. Nor do you know if the occupant will retaliate and destroy the interior.
On top of that, you may need to evict the tenant or owner from the premises after you receive the title, and eviction processes can be costly.
Buying a Foreclosure From the Bank
Foreclosure Traps to Avoid
A foreclosed home can present a savvy investment opportunity under the right circumstances. Do your homework, and you might just come away with a diamond in the rough.
When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;
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If you have received a Notice of Default “NOD”, take a deep breath, as this the time to start the FIGHT! and Protect your EQUITY!
If you do Nothing, you will see the WRONG parties WITHOUT standing STEAL your home right under your nose, and by the time you realize it, it might be too late! If your property has been foreclosed, use the available options on our package to reverse already foreclosed home and reclaim your most prized possession! You can do it by yourself! START Today — STOP Foreclosure Tomorrow!
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