Is Considering Foreclosure a Good Idea?
Buying a foreclosed home can be a great alternative, but many people find them confusing and for a good reason. First, there are different steps of foreclosures on properties, and the home can be bought during all three of these phases. Each phase has its own set of pros and cons, so it's up to you (and hopefully a real estate lawyer) to pick what is best for your situation.
Pre-Foreclosure Phase:
When a property is in pre-foreclosure, it means that the owner is behind on their
mortgage payments and are likely to start the foreclosure process. At this point, the owners still have control over the property and are compelled to sell at a lower price than the home is worth.
Foreclosure Phase:
Once a property is officially in foreclosure, the bank controls the property and its sale. Typically, they work with brokers to find buyers that will at least cover the amount that is left owed on the property. This can be done both through auctions, where you will need actual cash for the purchase, or through bank-owned listings via a
real estate agent.
Purchase Phase:
When you find a real estate owned (REO) property you are interested in its important to know that the purchase process may be a little different. While every lender is different, sometimes the condition of the property and reasons for the foreclosure may affect the future sale. If for example, the property needs a lot of work and repair it may not qualify for financing, so the option to mortgage the property may not be available. The sticker price may be well below market value, but more cash may be required to obtain ownership. Be prepared with how much you can afford to offer when searching for an REO.
Conclusion
The options can be endless when buying a home. It's important to stay focused and find the selection that will work best for you when purchases your new home.
