The Benefits of Buying a Foreclosed Home

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You may have heard stories of people finding spectacular foreclosed homes for extreme bargains, or perhaps you’ve heard of someone taking a risk on a foreclosure just to get burned with serious repair bills. 

Everyone has their own opinion of foreclosures, but the reality is that they are just like any other real estate deal. Buyers who don’t do their due diligence have a much greater chance of regretting their purchase later on.

So, what is so different about a foreclosed home? Well, it depends on what stage of foreclosure the home is in. The three stages of foreclosure are:

Pre-foreclosure

Pre-foreclosure is the time between the homeowner failing to make their mortgage payments and the foreclosure auction. During this time, the property is still technically owned by the homeowner. A few advantages of purchasing a home during pre-foreclosure are:

    • Leverage

Since the seller still owns the property at this point, they may be willing to make a favorable deal for you just to avoid the foreclosure altogether. Repairs and price concessions are not uncommon for sellers during the pre-foreclosure period. The seller may even offer a short sale, which is when the property is sold for less than what is owed on it. However, short sales must be approved by the current mortgage lender, not just the seller.

    • Disclosures

The seller must disclose any property condition issues to potential buyers during the pre-foreclosure period. If the seller does not disclose certain items and they come out later, the seller could be legally liable for any damage caused.

    • Financing

Non-cash financing is allowed during pre-foreclosure, so all types of mortgage loans and other financing is welcome to place offers.

Auction

After the pre-foreclosure is the auction. During the auction period, potential buyers are no longer allowed to have inspections done on the property and no disclosures about the property’s condition may be made. Despite these restrictions, auction can be a great time to purchase a foreclosure because:

    • Price

If you want the absolute best price on the property, buy it during the foreclosure auction. However, you better have some cash on you, since these auctions do not allow any type of financing.

    • Speed

Auctions usually only last an hour or two at the most, so no need to wait weeks for answers or responses from realtors, lenders, etc. All of the negotiating will be done the very same day!

    • Competition

Since real estate auctions are cash only, many potential buyers are pushed out of the running. Competition in these auctions is much lower than in the general real estate market.

Real estate-owned

If a property still doesn’t sell during the foreclosure auction, it becomes real estate-owned, or REO. REO properties are owned by a financial institution, usually the lender that held the foreclosed mortgage. These lenders can be slow and difficult to deal with since they are likely huge companies located in other places, but there are still some advantages to purchasing at this stage of the process:

    • Price

After the property didn’t sell during pre-foreclosure or the foreclosure auction, the lender now has more motivation to reduce the price or make other financial concessions to get the property sold quickly. While the price will still reflect market conditions, the REO phase is a great time to get a great deal too.

    • Financing

Non-cash financing offers are back on the table with REO properties, so the playing field opens back up to more potential buyers.

    • Inspections

Inspections and appraisals are once again allowed when a property is considered REO. However, keep in mind that since an REO is an as-is sale, no disclosures about property condition or history must be made.

If you’re considering purchasing a foreclosed home on the Gulf Coast, you’re probably looking for ways to cut down on the cost of the real estate transaction. That’s where Benefit Title Services comes into play Our real estate experts can help with title searches and other due diligence, work with realtors, and even collaborate with lenders to get you the best deal possible. Call us at (855) 832-9519 or contact us online to start your foreclosure purchase process today!