A foreclosure property is a property that a bank or other mortgage lender owns. It is also referred to a REO home – Real Estate Owned property.
It’s important to understand the benefits and challenges of foreclosure properties before beginning the process of purchasing one.
When a homeowner is unable to make their mortgage payments on a home, the bank or other mortgage-lender takes possession of the property. There are steps that take place before the home reaches the foreclosure status.
When a homeowner falls behind on their mortgage payments the lender gives them the opportunity to put up their home for sale as a "short sale." This means the lender would accept a selling price less than what the homeowner actually owes as payment in full. A short sale is the last attempt to pay off the mortgage and not go into foreclosure.
Listings such as short sales and foreclosure properties may be found within the local Multiple Listing Service (MLS). When and if an foreclosure property gets placed in the MLS varies according to the plans of the mortgage lender that holds the deed.
When purchasing a foreclosure property you may save on the price of the home, but you must remember that the bank will want to get the most they can toward what they are owed by the homeowner. You may pay for your savings in time, effort, and uncertainty. Purchasing a foreclosure property, like a short-sale property, takes longer to “seal the deal” so to speak.
Foreclosure properties offer unique challenges and some financial risk. You may be responsible for extra fees and expenses you hadn’t planned on when purchasing a foreclosed home. For example the home inspection, which is more critical than ever on properties like these. No matter what the findings are the bank and the homeowner will not pay for any repairs or renegotiate the agreed-upon selling price. This means you pay for an inspection and the repairs are your responsibility.
You should also consider the value of your time. Buying a foreclosure property may take longer than a typical home to close. However, since the rise of foreclosures in recent years, banks have learned a lot about how to streamline the process of selling foreclosed homes so the process is faster than it was.
Speak to us at ReMax at the Beach about your interest in looking at foreclosure properties. We’d be happy to show you what is available at this time. For some homebuyers, it can be the answer to finding a new home at a great price.