What is a foreclosure?
The past owners did not make their mortgage payment and follow through with the Promissory Note signed. After the redemption period is up, the owners are evicted and the bank takes over the home and sells it. The mortgage company will list the homes with a real estate professional to assist in liquidating its assets.
Can I get a good deal on a foreclosed home?
The foreclosure process is an expensive ordeal for the bank, from attorney fees, eviction, maintenance to selling the home. Years ago, it was thought that you could purchase a foreclosed home for pennies on the dollar. However, today, that is not the case. The bank wants to maximize their profit too and will put money into the home to rehab and sell for more money. Additionally, this provides the consumer the opportunity to finance a home and begin home ownership.
What is a short-sale?
Current home owners are behind on their mortgage payments and the bank is working with the owners to stay in the home while the home is being sold. The mortgage company will "short" the sale or take less than what is owed on the note.
The benefit to the mortgage company is the home is still being maintained, lived in and utilities are still on while a professional negotiates in getting the home sold. A short sale does not have anything to do with the time-frame of the sale and is usually a long, drawn-out process taking many months.
Owners going through a short sale process are still responsible for the home and their credit can be affected during this procedure.
Should I buy a Foreclosure?
Foreclosures can give buyers an opportunity to get into a home of their own at a slightly lower price. However, banks are now reinvesting money to rehab the asset instead of selling the home "as-is". The benefit of the bank rehabbing the asset is obvious, more money. Yet, rehabbing the asset allows buyers to purchase the home using financing compared to a cash buyer who will rehab, flip or rent out the asset.
How do I buy a Foreclosure?
Bank owned properties go through a portal and are ultimately sold with a licensed real estate Professional involved and put on the MLS. When purchasing a foreclosed home, make sure you are working with a professional who has sold foreclosed homes because there is more work, paperwork and understanding the process for you to successfully purchase the home.