How To Buy Foreclosed Houses
Following the mortgage crisis of 2007-2009, purchasing a foreclosed home was a challenging task. Prospective buyers had to attend auctions at courthouses or sift through lengthy legal documents to find properties of interest. However, in response to the subprime crisis, the availability of foreclosed homes increased, and the process of finding and acquiring them became more accessible.
Today, the search process for foreclosed homes is similar to that of any other type of home, with properties available in most real estate markets throughout the United States. As foreclosure rates have decreased, opportunities for both homeowners and investors to purchase foreclosed homes are still available.
How to Discover Foreclosed Homes for Sale
Uncovering foreclosed homes can lead to valuable opportunities, where one can find properties with great potential or sold below market value. Here are some methods to locate foreclosed homes:
Websites and print publications: Foreclosed properties are listed on various websites, online real estate searches, bank offices and websites, and local newspapers.
Multiple listing service (MLS): In local MLSs, the foreclosure status may not be explicitly highlighted but can be mentioned in the property description.
Foreclosure websites: Specialized websites like Fannie Mae's HomePath focus on homes and properties in foreclosure. Some financial institutions, such as Bank of America, also have dedicated web search pages for foreclosed homes.
Real estate professionals: Lenders now often sell seized assets through real estate agents. Don't hesitate to consult a real estate broker or agent who may specialize in foreclosure properties.
Types of Foreclosure Sales
The method of finding a foreclosed home depends on its stage in the foreclosure process. Properties in early stages or offered as short sales may still be owned by the original homeowner or held by a bank or government. Here are five types of foreclosure and their corresponding purchasing approaches:
Pre-foreclosures: These properties are in the pre-foreclosure phase after the mortgage lender has notified the borrowers of default but before the property is auctioned. Pre-foreclosures are typically listed in county and city courthouse buildings, as well as on online resources like Foreclosure.com.
Short Sales: In a short sale, the lender agrees to accept less than the amount owed on the mortgage. These properties are often underwater, meaning their value is less than the outstanding mortgage balance. Short sale listings are usually advertised as "pending bank approval," and specific real estate websites allow searching for properties in this category.
Sheriff's Sale Auctions: Sheriff's sale auctions take place after the lender has informed the borrower of default and allowed a grace period. These auctions are organized by local law enforcement authorities and occur at a publicly announced location and time. Notices can be found in local newspapers and online by searching for "sheriff sale auctions."
Foreclosed homes are typically priced lower than comparable properties in the same area, making them an attractive option for many buyers. In fact, most foreclosures are sold at a significant discount from market value, although the exact amount of the discount can vary depending on the region.
In addition to the lower price, buyers of foreclosed properties may also be offered additional incentives, such as reduced down payments, lower interest rates, or waived appraisal and closing costs.
So, why are these properties priced so much lower than others?
In many cases, it's because the owners are in financial distress and need to sell the property quickly before they lose possession of it. This puts them in a weak negotiating position, which can work to the buyer's advantage.
If the property has already been seized by the bank or sheriff's office, the seller is even more motivated to sell quickly and may be willing to accept a lower price. Banks and other financial institutions typically want to get rid of foreclosed properties as soon as possible, so they can recoup some of their losses and avoid being in the landlord business.
Overall, the lower price of foreclosed homes can be a great opportunity for buyers, especially those who are willing to put in some extra effort to find the right property and negotiate a good deal.