You may have heard that pursuing foreclosure sales is the best way to get a good deal in real estate. While it is true that foreclosure sales can be sold below value, it is important to be aware of the process and potential pitfalls.
Foreclosure is the seizure of a property from the homeowner by a lender. This usually happens when the homeowner fails to cover mortgage payments and the property is seized by the mortgage holder. This can happen for any number of reasons, including unemployment, divorce, illness, or death. Similarly, in a tax foreclosure the property is taken over by the government because the owner has failed to pay taxes on it. After 3-6 months of missed payments, the homeowner will receive foreclosure notification. If the owner or borrower does not reach an agreement of a deed in Lieu of foreclosure or pay up outstanding loans by the specified date, the property will go to auction. Buying a home at a foreclosure auction can be a great investment. However, the deal is not without risks and is best done in consultation with a real estate agent that is a foreclosure expert and aware of the many pitfalls. Foreclosure properties are known to take a long time to close, sometimes up to a year! So be prepared to have this expectation when looking into this route.
In addition, you should be aware that:
The foreclosure process varies from state to state, and it is important to research the relevant laws prior to entering negotiations. Individual states follow either a judicial or non-judicial foreclosure process, with additional differences between states. An experienced real estate agent can guide you as to what legal counsel you may need.
With the right conditions, buying a home in foreclosure can be a profitable venture. It should be considered in the context of other available properties and take into account your needs and financial abilities. When deciding on the property that's right for you, it is important to work with a real estate agent who can keep all options open and guide you to the perfect match.