The Process for Buying Foreclosed Homes
The process for buying foreclosed homes depends on what stage of foreclosure the home is in. If you are buying homes that have already been foreclosed, you will probably need to go through a real estate agent to buy the home. If the property is still in the process of foreclosure, you can either wait for it to go up for auction or try to work with the owner to buy the property.
Buying Homes that Have Already Been Foreclosed
To buy homes that are already foreclosed, you first need to know how to locate the properties. Most foreclosed homes will show up when you search for property listing at online websites such as Realtor.com. You can also search for foreclosed properties through Free Foreclosure Database or look for homes through the HUD website. Another way to find listings of foreclosed homes is by visiting the websites of banks and mortgage lenders and looking for listings on them. For example, if you're looking for Bank of America foreclosures, you should check the Bank of America website.
Once you have found a listing for a foreclosed home that you are interested in, you can call the real estate agent whose information appears on the listing and get more information. The real estate agent can arrange for you to look at the property and should be able to tell you which lenders and mortgage brokers in the area are easiest to work with if you need to obtain financing.
Buying Homes at Foreclosure Auctions
Before a lender can sell a foreclosure property at auction, a notice usually must be published in a local newspaper. This notice contains the address or legal description of the property, along with information about how much money is owed on it. If you want to purchase foreclosed properties at auction, you need to find out which paper publishes these notices and get a subscription.
When you purchase a home at auction, you are buying it "as is," so get as much information as you can in advance. You usually can't get inside of the house to inspect it, but you can do a drive-by and take note of any obvious damage or vandalism. You may be able to get additional information from the neighbors.
Once you have seen the outside of the house and are convinced that it may have potential, take a trip to the county building to the office that keeps property records. The name of the office varies from state to state, but property records are public information in all states. You just have to find out where they are kept. Check to see if there are any other liens on the property besides the one that is being foreclosed. This is very important information.
Liens on foreclosed homes have "priority" in the order that they are filed in most cases. So the mortgage filed first has priority over a second mortgage and so on. If the lien that is being foreclosed is a junior lien such as a 2nd mortgage, keep in mind that the first mortgage and other other liens senior to the one being foreclosed will have to be paid off by the person buying the home at auction. You must take into consideration the amount owed on these senior liens when making your bid since you will have to pay them if you win.
You will have to make a cash deposit at the auction if you win, and the balance will need to be paid shortly afterward. Make sure you check the laws for foreclosure auctions in your state so that you are prepared. You need to know how much cash you will need to take to the auction and how much time you will have to pay the rest once the auction is over.
Buying Pre-Foreclosure Homes
The process for buying pre-foreclosure real estate is much different. Pre-foreclosures are harder to find than foreclosures. Information about owners who have fallen behind on their payments but are not yet in foreclosure is not public record, so you have to get them to find you. You do this by advertising. Some common methods used by real estate investors to locate pre-foreclosure homes are yard signs, billboards and newspaper ads.
Once you have found a pre-foreclosure, you can try to negotiate a good price with the owner. If the price you are willing to pay is lower than the amount owed on the home, it may be possible to do a short sale. What that means is that you work with the lender to get them to agree to release the mortgage even though the amount they received was less than what was owed. Short sales involve a lot of time and paperwork and some banks can be very difficult to deal with, but it is sometimes possible to get a great deal on a house by doing a short sale.
What to Watch Out for When Buying Foreclosures
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