FORECLOSURES BUYING PROCESS

Many home buyers associate buying a foreclosure with getting a deal. This can be true, but there are potential pitfalls. Foreclosure is a process with four distinct phases. The terms and length of each phase vary by state and sometimes by lender. The pros and cons of buying a home involved in foreclosure vary with the phase of foreclosure the property is in when purchased.

 

PHASE ONE: MOTIVATED SELLER (MISSED MORTGAGE PAYMENTS)

Buyer Advantages:

- Financing available for purchase.
- Due diligence inspections included in process.
- Seller obligated to provide full disclosure.

Buyer Challenges:

- Seller may have little, if any, ability to negotiate price depending on their outstanding obligations on the home.


PHASE TWO: SHORT SALE - PRE- FORECLOSURE NOTICE OF DEFAULT

Buyer Advantages:

- Motivated seller.
- Financing available for purchase.
- Due diligence inspections included in process.
- Seller obligated to provide full disclosure.

Buyer Challenges:

- Lender must approve purchase price and terms of sale including any closing cost credits and purchase may take between 45 - 90 days to close.

 

PHASE THREE: FORECLOSURE AUCTION

Buyer Advantages:

- Property sold for outstanding mortgage balance owed to  
foreclosing mortgage holder and therefore the price for the property may be very low and no commissions or attorney's fees paid. 

Buyer Challenges:

- Auction price must be paid in cash; generally no mortgage financing is accepted.
- As-is sale; no inspections and no disclosures given to buyer
Liens, back taxes and other obligations may be acquired by buyer.
Buyer must research title prior to auction.

 

PHASE FOUR:  BANK OWNED PROPERTY/REO (REAL ESTATE OWNED BY LENDER)

Buyer Advantages:

- Title will be clear and buyer will not assume any liens, mortgage or back taxes of prior owners.
- Mortgage financing available.
- Inspections may be conducted.
- House is vacant.
- Property listed on Multiple Listing Service (MLS); bank will pay real estate agent commissions.
- REO sales close within normal escrow timeframe.

Buyer Challenges:

- As-is sale; no repairs.
- Banks usually require additional paperwork.
- Banks cannot provide disclosures on property history or condition.
Curasi Realty, Inc.
Curasi Realty, Inc.
(845) 457-9174