How to
Buy a Foreclosure - Merits and Risks
By Kevin Simpson
There are three very distinct phases in the foreclosure process at which
time any investor or potential home buyer is able to buy a foreclosure.
These phases are pre-foreclosures (when the lender has issued notice of
default), auction (when the house is put on sale) and post foreclosure
(when the house is already a bank owned property). All three phases have
their own merits in terms of earning significant discounts, but the also
require a different approach from the buyer.
When learning how to buy a foreclosure in the pre-foreclosure and
auction sale phase of the process a great deal more knowledge is required.
This is the time when the more experienced investor generally enjoys more
success as they have the experience and knowledge necessary in order to
pull off a good deal. There are many factors involved in this process than
when a house becomes a bank owned property or REO.
For example, if a home owner receives a notice of default from his
lender, this means that the property has entered the pre-foreclosure
phase. The wise investor who has the knowledge to search for mortgages in
default, will have to approach the home owner with a view to "helping"
them get out of the financial difficulty they find themselves in. This is
not an easy task as home owners in default are often defensive and not
easy to approach. But this is not the end to it, there may be tax and
other liens over the mortgage, and the investor has to determine whether
the property will be a bargain or not.
Many home owners in default are willing to sell their property at
discounted prices to avoid the foreclosure process. But the investor
requires all their documentation to assess what is in it for him too. If
they do not have this to hand, he can conduct a title search and this
allows him to see what liens are held over the mortgage. He would then
have to negotiate with all lien holders to try to pay these liens at
negotiated discounts. The lender needs to be paid what is owed to him and
in many instances the home owner will also walk away with some money in
his pocket. This is what is known as a win-win situation.
At the Auction phase the same amount of research is required, it is
sometimes difficult to view a house if the home owner is still in
occupancy, as he is still in pre-foreclosure. This makes things extremely
difficult. If you cannot see the condition of the property you have to
guess what you might bid at auction and even then there are risks. There
is still the matter of liens, but as said previously a title search will
reveal these. Then there is a matter of the home owner being aggressive
about the foreclosure sale, and in some instances I have heard of
investors losing money due to home owners damaging the property
deliberately.
Search
foreclosures by state or get more information on
foreclosure
homes at ForeclosureWarehouse.com.
Article Source:
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