(ARA) – With the downturn in the economy over the past two
years, hundreds of thousands of homes have gone into foreclosure,
offering a unique, once-in-a-lifetime opportunity for many
Americans to buy a home at an unheard of price, sometimes 30
percent or more off the most recent sale price.
Buying a home is always a challenge. Buying a foreclosed home
presents unique challenges, however. You need to be willing to
hunt, put up with lenders who offer surprisingly little information
about the properties they’ve taken back, real estate agents who
have little experience or incentive in selling foreclosed homes,
and loan officers who demand nearly perfect credit ratings to
obtain a loan in today’s tight-fisted market.
Foreclosed properties are typically referred to as REOs (real
estate owned by the lender), according to FindLaw.com, a leading
online resource for legal information, and are owned by the lending
institution or government agency that backed the mortgage. For one
reason or another, the owner failed to make payments on the loan
and the lender foreclosed on the property (repossessed it).
Banks and other home-lending institutions are not in the
business of owning property. They’re in the business of making
money on the money they lend. So it’s in their best interest to
sell a foreclosed property, and they are often anxious to do so.
Properties of all types, including single-family homes and
condominiums, can be foreclosed. Depending upon local regulations
and traditions, some lending institutions will sell their
properties through real estate agents who specialize in REO
properties, while other institutions will sell foreclosed
properties through auctions conducted by a county sheriff.
Because of the volume of foreclosed homes currently on the
market, a growing number of lenders have turned to selling
properties through heavily advertised public auctions in which
dozens or sometimes hundreds of properties are sold in one or two
days. The Federal Housing Administration (FHA) has sold foreclosed
properties through local auctions for many years, typically
announced in the classified sections of local newspapers. Potential
buyers submit bids on the day of the auction, accompanied by a
certified check for a percentage of the bid price. The highest
bidder usually gets the home.
Buying a foreclosed property can be risky if you are not
familiar with the procedures involved. Such a sale may not include
the safeguards that are present in a traditional sale, such as a
lender and a title insurance company. Therefore, if you plan to buy
foreclosed properties, says FindLaw.com, it is important to
familiarize yourself with the process and consult with a lawyer who
specializes in this area.
Here are some other tips from FindLaw.com about buying a
foreclosed home:
* Not all foreclosed properties are good deals. It seems like
foreclosed properties are everywhere these days; however, not every
property is a smart purchase. Search for a foreclosed property as
if you were buying a home in a hot market. Start by researching
neighborhoods that you really want to live in, then get in your car
and drive through the neighborhood looking for properties that
aren’t kept up as well as neighboring properties.
* Find an experienced real estate agent. Some sellers of
foreclosed properties, including lenders that have repossessed a
property, may refuse to work directly with the buyer. Find a real
estate agency that has experience in dealing with foreclosures and
is willing to represent you.
* Hire a real estate attorney. All states have different laws
and regulations involving foreclosed properties. You may need to
consult with a real estate attorney specializing in foreclosed
properties to assist you. Buying a foreclosed home can be a very
complex and time-consuming process in some states; the right
attorney may be able to help you cut through the red tape.
* Check the assessor’s office. Many counties now include vital
ownership and tax information on their Web sites about residential
property, including the identity of the owner, the previous price
paid for the home, and how much the property is being taxed.
Knowing what the previous owner paid for the property will help you
gauge its potential worth now.
* Tour and inspect the property. It’s vital to inspect any
property before buying it, but it’s absolutely critical when buying
a foreclosed property. Many foreclosed homes are not kept up or
have been abused by their former owner and may require thousands of
dollars in repairs and maintenance. If the property is located in a
neighborhood with a lot of potential, investing to rehab a property
may be worth the money.
* Have your financing lined up. Over the past two years, many
lenders have tightened their lending standards and are only
offering loans to those who have solid credit ratings and the
long-term means to pay for a home. Sellers of foreclosed properties
are leery of buyers who don’t have their financing together. Like
buying a home at the top of the market, it’s in your best interest
to offer the most solid financial package in order to win the home
you want.
To learn more about the legal aspects of buying and selling real
estate, visit www.FindLaw.com.
Courtesy of ARAcontent
