What Happens If A Foreclosed Home Doesnt Sell
If a house isnt sold at auction, the property becomes whats known as an REO, or real estate owned property. But dont assume this is a free pass to stay in the home.
If the bank owns the foreclosure, more often than not, they will arrive at the property shortly after the foreclosure date and kick you out, Blake warns. They might offer the previous homeowners cash for keys or relocation assistance, where the bank offers a certain amount of money to the previous homeowners to vacate the premise.
While you cant count on this money, it cant hurt to ask in case this sum helps you move out, and on with your life.
When Buying A Foreclosure Work With An Experienced Real Estate Agent
Working with an experienced real estate agent will help ensure a successful purchase. Your agent will be able to answer questions about the process to help you understand the particulars of purchasing a foreclosure. Your agent may also help you determine whether or not the foreclosed home you wish to purchase is a good deal, and if the property is worth pursuing based on necessary repairs.
So, should you buy a foreclosed home in Tennessee? Buying a foreclosure might be a great way to purchase a home, though the process is complicated and may take a long time. You should understand the pros and cons and speak to your professional real estate agent before you consider buying a foreclosed house.
For informational purposes only. Always consult with a licensed mortgage professional before proceeding.
The Ashton Real Estate Group of RE/MAX Advantage
The #1 RE/MAX team in the World!
Buying A Foreclosed Home: Pros And Cons
Buying a foreclosed home is a personal decision. It depends on a variety of factors, including your risk tolerance, the propertys potential reward, financing and your ability to move quickly. In many cases youre also benefiting from someone elses misfortune, which can be a deal-breaker for some people. Here are some pros and cons to consider.
Recommended Reading: Bankruptcy Dismissal Vs Discharge
First Things First: Foreclosed Homes Are Sold As
As much as we might like it to be true, theres no such thing as having your cake and eating it too. Buying a foreclosed home is no exception, as theyre nearly always sold on an as-is basis.
What that means in practice is that what you see is what you get. Buyers of foreclosed homes can still conduct an inspection, but the sellerusually a bank or local governmentisnt obligated to make repairs, nor will the sales price be discounted to compensate you for repairs or improvements that need to be made.
Tips About The Auction Process
Foreclosure auctions are usually run by a local county representative or a private company. Buying a foreclosure at a real estate auction means learning how the specific in-person auction or auction website works. Here are some tips.
You May Like: Will Filing Bankruptcy Affect My Credit
Tips For Buying A Foreclosure
Over the years working as a real estate agent, many buyers have asked me about buying a foreclosed home. They essentially are asking how to buy a foreclosure.
The appeal is that theyve heard foreclosures are the bargain of the century.
If you are considering buying a foreclosed home, it is essential to do your homework before making an offer on a property and putting up your earnest money.
Foreclosures can certainly be a great deal but they are not always as much of a bargain as people assume they will be.
Buying a foreclosure also requires going through a slightly different process than a traditional home purchase. There are certainly pros and cons to buying a foreclosed property.
In the end, buying a foreclosed home can be very rewarding, but only in specific circumstances.
Lets take a look at the foreclosure process to figure out if its right for you. If you can get a good deal it just might be!
How To Obtain Financing For A Foreclosed House
This is something of the Achilles heel of the foreclosure buying process. The absolute best way to purchase foreclosed properties is to pay all cash. Not only does this enable you to move quickly, but it also avoids the need for lender required repairs. But, if you dont have that kind of cash, financing is available for certain types of foreclosed properties.
Understand that if you are going to use financing to purchase a foreclosed property, the process will be much more complicated than it would be if you were to purchase an owner-occupied home. For starters, lenders typically require that any issues regarding safety or livability are completed prior to closing.
In most cases, traditional conventional mortgage financing will not be an option, but there are other potential sources.
Also Check: How Soon Will My Credit Score Improve After Bankruptcy
Downsides To This Stage Of Foreclosure
The downside for a buyer purchasing a pre-foreclosure/short sale is the length of time to complete the transaction. Short sales really should be called long sales.
Many short sales take double or triple the time of your typical closing period. If there is more than one mortgage holder on the property, the time to close can be even longer. You should always plan on closing being a long time away with a short sale.
There is also no guarantee the mortgage holder will accept a buyers offer. It should be noted the lender will have the property appraised to determine its value. An offer will be rejected if it does not fall somewhere within percentage points of the fair market value.
If an agreement cannot be reached foreclosure proceedings will continue forward.
When real estate markets and the economy are soft, you will tend to see more houses in foreclosure. Foreclosed houses become more prevalent because of many things, including job loss, loss of wages, or owners walking away because the propertys value is less than what they owe the lender.
A Note About Purchasing Through Short Sale
A short sale occurs when the homeowner sells a home for less than what they owe on the mortgage because the value has declined. Foreclosure has not been completed with a home up for short sale. The homeowner still owns the home so you work through their REALTOR®.
When you buy a home in a short sale, the lender needs to approve your offer. You might spend a lot of time waiting for approval.
Recommended Reading: When Does A Bankruptcy Fall Off Your Credit Report
The Types Of Foreclosure Sale
Finding a foreclosed home depends on where exactly it is in the foreclosure process. Properties in the early stages of foreclosure or offered in a short sale may still be owned by the original homeowner or held by a bank or government.
Here are five types of foreclosure and the approaches to buying:
What Is The Typical Method Of Payment At A Foreclosure Auction
The great majority of in-person foreclosure auctions and sheriffs sale auctions require firm money payment cash, cashiers check, or bank money order. Many online auctions, on the other hand, allow foreclosure auction purchases to be financed through a hard money loan or even a traditional mortgage.
What happens when a foreclosed house goes to auction?
Typically, the lender starts the bid for the amount owed on the property plus any foreclosure fees. At the auction, the property goes to the highest bidder. After the bidding ends, the new homeowner gets the trustees deed as proof of ownership to the property.
Do you need cash to buy a foreclosure at auction?
Can I still buy at auction? Yes, you can and many of our buyers purchase with finance provided by lenders. You will nearly always need to have the deposit monies, however if you have other property assets you may be able to borrow against these.
You May Like: Bankruptcy Friendly Auto Loans
Bid Higher If Other Foreclosures Are Selling Quickly
When a foreclosure comes on the market there is frequently high competition, so be prepared to bid fast and high. Theres no exact formula on what the banks bottom line will be, so if foreclosed homes in your area are selling quickly, its important to work with your agent to craft a strong offer, backed up by your preapproval letter if obtaining a mortgage. In many instances, foreclosures are already discounted, so an offer thats too low might be a non-starter for the bank.
Keep in mind that the type of house and location matter, and some homes might sell faster than others. In competitive markets, you might need to offer asking price and keep contingencies to a minimum.
How Long Does It Take To Buy A Foreclosed Home In Pennsylvania
This can vary a lot, but if you’re buying a pre-foreclosure or REO with conventional financing, you’ll need an inspection and appraisal, so closing will take at least 30-45 days. The foreclosureprocess itself can take months, but you can shorten that wait time by purchasing during the pre-foreclosure stage.
Auctions can’t be scheduled until the foreclosure process is complete, and they can be postponed up to another 100 days after the initial scheduled date. That said, paying for and closing on an auctioned property shouldn’t take more than a coupleof weeks.
Read Also: How Long Does Bankruptcy Show Up On Credit Report
Online Options: Foreclosure Websites
Using sites that specialize in foreclosures can help you learn about options that arent on the Multiple Listing Service . Here are a few free sites to try:
- Homepath.com. Shows Fannie Mae-owned foreclosures
- HomeSteps.com. Shows Freddie Mac-owned foreclosures
- HUD.gov. Shows government-owned foreclosures
- Auction.com. Shows foreclosures that arent on the MLS
- Zillow, Redfin. Through search filters, users can identify foreclosures for sale
You can also do an online search for the name of a county to find local auctions, which might be held online or in person.
Make Sure Your Offer Is Competitive On A Foreclosure
Depending on where you are buying, foreclosures may be selling quickly and for reasonable prices. You have to adapt to the market conditions as a buyer, so that means you may need to offer a higher price than you think to compete with other foreclosure buyers.
Your agent can give you an idea of what offer is the right market price. You want to make a strong offer so you can land the sale if you offer too little, the bank might not take you seriously.
It is worth remembering that foreclosures are often priced competitively from the outset. Banks are not sentimental about foreclosed homes. They want to sell them as fast as possible.
If you offer too much lower than the initial price, you could lose out on the purchase. Work with your agent to decide which price makes the most sense based on current market conditions.
Read Also: Which Milk Company Filed For Bankruptcy
Where Can You Find Foreclosure Auctions
With the popularity of foreclosure auctions, you can find them in numerous places. Foreclosures are put up for auction both online and at live, in-person auction events.
Local newspapers can list upcoming foreclosures.
In small towns, they have their own newspaper. Thats where people would put legal things like foreclosures.
Durham says that in Georgia, foreclosures must be advertised for four weeks leading up to the sale. If they miss one , they have to start over the next month, explains Durham.
You can also find foreclosure auctions on websites such as foreclosure.com or city and county public records. An experienced real estate agent can also help you find upcoming foreclosure auctions.
What Are The Cons Of Buying A Foreclosed Home
When you buy a bank-owned foreclosure, youre purchasing the property with all its worts.
- Banks seldom make repairs.
- You will be purchasing the house as-is.
- Some lenders will require you to sign additional paperwork outside the norm.
Lastly, the bank has never lived in the property and therefore wont have any intimate details that otherwise might have to be disclosed.
When purchasing a foreclosure, it ramps up the importance of doing thorough house buying due diligence. Numerous people have regretted their decision to buy a foreclosed house. Foreclosure houses often come with warts that may not be detected until after youre living in the home.
Recommended Reading: How To Claim Bankruptcy In Washington State
Team Up With A Real Estate Agent Who Knows How To Buy A Foreclosure
With so many real estate agents out there, it is crucial to look for one who meets your needs. Some agents are more experienced with foreclosures than others, making them a better choice when attempting to purchase a home from a lender.
It will be a good idea to have an exceptional buyers agent when buying distressed properties. Someone who has some experience with a foreclosure purchase will be preferred.
There are actually certification programs that real estate agents can go through to learn more about buying foreclosures, certifications that you can look for when choosing an agent. These programs include the Certified Distressed Property Expert and the Short Sales and Foreclosure Resource programs.
Keep in mind that experience is everything when buying specialty real estate. Youll want to feel confident your agent knows their way around the foreclosure buying process. Buying houses in foreclosure is not something that should be taken for granted. It would be best to stay away from rookie agents.
Whatever you do, dont use the real estate agent that works for the lender to purchase a foreclosure! The listing agent represents the seller, NOT you. By going directly to the listing agent, you could be setting yourself up for dual agency, whereby the agent becomes a neutral party.
There is only one person who benefits from dual agency the real estate agent. Dont be suckered.
Hire A Top Pennsylvania Realtor With Foreclosure Expertise
Buying a foreclosed home in Pennsylvania can be a complicated process. That’s why hiring an agent with experience with foreclosures can make all the difference. They help you navigate the additional risks, effectively negotiate with motivated anddistressed sellers, and avoid missing important deadlines.
It’s also possible your agent will have a relationship with REO departments of local lenders or other entities who deal with foreclosed homes. Having the inside track could mean being the first person able to put in an offer on a property with greatpotential.
Talk to a Clever agent today to see what they can do to help you navigate the foreclosure process and find your dream home.
Recommended Reading: Liquidation Pallets Charlotte Nc
Team Up With A Buyer’s Agent Who Understands How To Buy A Foreclosure
Buying a foreclosure that’s on the MLS is similar to the traditional process of buying a house. However, dealing with an auction, figuring out how to make an offer on a home that’s in pre-foreclosure or navigating a short sale can feel disorienting even if it’s not your first time buying a home. A buyer’s real estate agent who has experience helping buyers purchase foreclosures can be a major asset.
Hire An Experienced Real Estate Agent
If you decide to go the route of purchasing a foreclosure, youll want to find an experienced real estate agent who has access to a local multiple listing service and knows the local market.
This agent can help you determine when a foreclosed home is offered at a bargain price or when its listed at an asking price thats too high for the risk involved. An agent may also help you find foreclosed properties that other buyers might miss.
Additionally, a good real estate agent can discuss challenges you could run into with a foreclosed property. Bear in mind that every state has unique laws and regulations concerning foreclosures. Its important to work with an expert who understands these laws.
Recommended Reading: How Many Time Can A Person File Bankruptcy
Home Auctions Vs Home Traditional Sales
How do you buy a foreclosed home in Franklin or the surrounding areas? Homes in foreclosure are usually sold in one of two ways: through an auction or through a traditional sale. Auction sales are usually at the county courthouse. They can be competitive, complicated and somewhat mystifying to the inexperienced buyer. If you plan to purchase a foreclosed home at auction, the buyer usually needs to have the cash on hand for the purchase, and they may be held responsible for evicting the current occupants if they win the bidding process. Do research about the property before putting down a bid, including finding out about debts owed on the property, as you may become responsible for these debts after purchase.
If the home doesn’t sell at auction, the lender usually takes possession of the property and will sell the home in a more traditional fashion. This is often called a “bank-owned property.” In some cases, the bank may hire a real estate agent to manage the sale of the property, and in other cases the home will be sold directly by the bank. Either way, your real estate agent will help facilitate the purchase and guide you through how to buy foreclosure homes.
