Looking for a House? Remember to Check Out Foreclosed Homes!
When someone can’t pay their mortgage, the bank takes their house. This is called foreclosure. The bank then sells the house to get its money back. Missing a few payments doesn’t lead straight to foreclosure. There’s a process, which can take a long time, depending on the state. The bank can use two methods to take the house—one through the courts and the other without going to court.
Can you sell a house in foreclosure?
Even if your house is going through foreclosure or is about to, you can still sell it. This can help you pay back what you owe the bank and avoid big damage to your credit score. You might not make as much money as you hoped, but it can save you from serious financial trouble.
How To Buy A Foreclosed Home
Wondering if buying a foreclosed home is a good idea for you? Well, here’s what you need to do to buy one:
Choose from Different Types of Foreclosure Purposes
There are a few ways to buy a foreclosure: at auction, directly from the lender, or before it’s fully foreclosed.
- Auction Purchase: You can get a home quickly and possibly at a low price, but you need cash, and there’s no guarantee about the home’s condition.
- Buying from the Bank: You skip dealing with the previous owner, but you might need an agent to find these homes. They’re sold as-is, but you can usually check them out beforehand.
- Pre-foreclosure purchase: These are homes in the early stages of foreclosure. You might find them in listings, but you’ll need to do more research. It could be a good deal for both you and the current owner.
- Short Sale: This is when the homeowner sells for less than they owe on the mortgage. It’s not always a pre-foreclosure, but sometimes it is. You’ll need to wait for the lender to approve your offer, which can take a while.
Work with a Real Estate Agent
When banks take back foreclosed homes, they usually use a special agent called an REO agent. These agents team up with regular real estate agents to sell the homes. However, not all agents know how to work with REO agents. That’s where a good foreclosure agent comes in. They know how to find foreclosed homes, help you through the buying process, negotiate prices, get inspections done, and make offers.
Find For Sale Foreclosures
Your real estate agent can help you find foreclosed homes, but it’s good to look on your own too. The internet makes it easy to find foreclosures in your area and across the country. There are lots of websites that can help, like the Department of Housing and Urban Development (HUD), which is a government site listing foreclosed homes. Your agent can also talk to the agent in charge of the property for you.
Get Pre-approved for a Mortgage
Unless you buy a home at an auction, you’ll likely need a mortgage to buy one. Once you’re working with an agent and checking out homes, it’s smart to get preapproved for a loan. Pre-approval tells you how much you can borrow for a home loan. It’s a good idea to apply for a few pre-approvals to help you find the right mortgage lender.
Appraisal and Home Inspection
Inspections and appraisals are super important when buying a foreclosure. An appraisal tells you how much the house is worth, which helps lenders make sure they’re not lending too much money. For buyers, it helps make sure you’re not paying too much. A home inspection checks everything in the house, inside and out, to see what needs fixing. Since foreclosed homes often need a lot of repairs, always get an inspection before buying one. If you can’t, only go for it if you’re good at fixing things up.
Make a Deal and Purchase Your Home
Once you have the inspection and appraisal reports, check them to see if the home is a good fit for you, especially if it needs repairs. If you’re ready to handle renovations or have the funds for them, talk to your mortgage lender to finish up your loan. Your real estate agent will assist you in making an offer and getting ready for the closing process.
Benefits of Buying a House in Foreclosure
Buying a foreclosed home has its perks:
- Lower Prices: Foreclosed homes usually cost less than other homes because lenders want to sell them quickly.
- Loan Options: You can still get a loan to buy a foreclosed home if it’s not a cash-only sale. You might qualify for a regular loan or a government-backed one like a VA, FHA, or USDA loan, which can make buying a home more affordable. However the house has to meet certain standards set by the loan program.
Disadvantages of Buying a Foreclosed House
Buying a foreclosed home can be riskier than buying one where someone already lives. Here are some reasons why:
- More Repairs: Previous owners might not have taken care of the house, so you might have to fix a lot of things yourself after you buy it.
- Sold As-Is: The bank just wants to sell the house fast to get their money back, so they usually sell it as is. If you can’t afford to fix things up, it might not be the best choice for you.
- Squatters: Even though the bank legally owns the house, sometimes people still live there without permission. Getting them out can take a long time and cost a lot of money in legal fees.
Buying a Foreclosed Home Has Its Perks and Limitations
Thinking about buying a foreclosed home? Make sure you understand the process, pros, and cons. Learn about foreclosure, explore your options, and work with an experienced agent. Research properties online and get preapproved for a mortgage. Don’t forget to schedule inspections and appraisals before making any deals. Finally, weigh the benefits and drawbacks carefully before making your decision.
