Your Guide to Purchasing a Foreclosed Home
It’s never been easier to find a foreclosed home for sale since there are so many online sites that now specialize in them. In today’s blog, we’re taking a closer look at the various types of foreclosures available as well as the process and how you can be sure you’re getting the best house for the best price.
How to locate a foreclosed home—Foreclosed properties can be found on Multiple-Listing Service (MLS) websites, online real estate searches, and through local newspapers. Another popular route people often choose is through Fannie Mae’s HomePath.com. Keep in mind, real estate agents are constantly selling their seized assets so contacting a real estate broker may be helpful as well.
Foreclosure Stages—Finding a foreclosed home depends on where the home is in the foreclosure process. Here’s a breakdown of the various stages:
- The pre-foreclosure stage—When a property is in pre-foreclosure after the mortgage lender has notified the borrowers that they are in default but before the property is offered for sale at auction. Doing this may allow the owner to avoid foreclosure proceedings and its negative effect on their credit history and future prospects. Many online resources, including com, list properties that are in the pre-foreclosure phase.
- The short sale stage—When the lender is willing to accept less for the property than what is owed on a mortgage. Borrowers are sometimes able to get lenders to agree to a short sale, but they usually need some sort of proof of financial hardship. The only major difference between purchasing a short-sale property and a traditional purchase is needing to wait for a lender’s approval in a short-sale property purchase.
- A Sheriff’s sale auction— This occurs after the lender has notified the borrower of default on payment and allowed a grace period for the borrower to catch up on mortgage payments. This allows the lender to get repaid quickly for the loan that is in default. Auctions like these occur on courthouse steps and are managed by local law-enforcement. When properties do not sell at an auction they are reverted back to the bank and are referred to as Bank-Owned Properties or Real Estate Owned Properties.
Can you buy a home with an FHA loan? An FHA loan is a Federal Housing Authority loan that insures mortgage loans to help qualified buyers with teetering financial stability and unfavorable credit. As long as the foreclosed home meets the FHA’s requirements for factors such as value, safety and habitability, you can use an FHA loan to purchase the home.
Is it a good idea to purchase a foreclosed home? If saving money is your number one priority in purchasing a new property, buying a foreclosed home may be the smart decision for you. This is because the amount you save by buying a foreclosed home will most likely be the greatest overall benefit of buying property this way. The most prevalent downsides to purchasing a foreclosed house are not being able to see a walk-through before purchasing and trusting that that property is good “as is.” That being said, the home will ultimately require maintenance fees in order to make the property move-in condition since the past owners typically will leave them neglected for months.
We hope this helped guide you in the decision making process of purchasing a foreclosed home. There’s a lot to consider, however, if you can get the home you’re looking for in the right location, at the right price and you’re prepared to invest some sweat equity—it’s a great option!