Why Foreclosures Can Actually Be A Good Thing
You don’t have to be a private investigator to find a foreclosure these days. They can be found in all type of neighborhoods and in all income ranges. You may have heard that buying foreclosures can be a long and risky process. And it certainly can be especially if you don’t know the process. Here are some tips to help you find your first (or next) foreclosed property.
Where to find foreclosures
There are several ways to find foreclosures. One way is to simply drive through neighborhoods and look for foreclosure signs posted. Many traditional lenders also have lists of REO (real estate owned) properties that are being sold by the banks. You can contact the bank and ask to be put on their mailing list. You can also contact real estate agents who specialize in REO’s. Another obvious resource that many people tend to overlook in today’s times is the newspaper. But perhaps the best place to start is the online public records for the county courthouse. This is where you can find all the real estate transactions for a property in a particular county that are recorded.
Another great way to buy a property is during its pre-foreclosure stage. This is also called a short sale, meaning that the bank has agreed to take a price lower than what is actually owed on the mortgage. But why would they be willing to do this? Sometimes the discounted price they take will be cheaper than actually following through with the foreclosure process only for the property to be put up for sale on the courthouse steps, not sell, and become an REO anyway. By approaching the homeowner to buy their property during this stage can actually be a win/win for everyone involved. In some states, homeowners have as much as a six month grace period to get caught back up on their loan before banks follow through with the foreclosure process. And many times the homeowners are only behind 2-3 months of payments.
Disadvantages of Foreclosures
Although foreclosures are great way to get homes at under market value, there are a few things you should consider before taking the leap to purchase a foreclosed property. Some foreclosures have what is called a “cloud” on the title. In other words, the property has a lien or a judgment against it. Some buyers think they are getting a foreclosed property at a steal, only to find out there are significant liens against the property that will have to be paid before you transfer the title into your name. In addition some homeowners may sell just about everything inside the home before the foreclosure including: fixtures, dishwashers, air conditioners, etc. And since many foreclosures are bought sight unseen, you run the risk of having a lot of unforeseen expenses that could potentially put you in a position where you may actually lose money on the property in the end.
When you decide to enter into the foreclosure market, know that while this strategy may not be perfect, the end result can be good for everyone – a discounted property for you, the investor, and you’re helping a distressed seller.