How to Buy A Foreclosure
According to the Mortgage Bankers Association the rate of foreclosure starts and the percent of loans in the process of foreclosure are at the highest levels ever. Opportunities abound in the foreclosed home market. Knowing the foreclosure process and understanding the foreclosure market can only increase your success. There are three phases of the foreclosure process where you can buy a home or investment property. The pre-foreclosure phase allows you to buy directly from the homeowner without having to compete with banks and other investors. The sale phase involves biding at auction, and the REO phase involves working with lenders or realtors who work on the lenders behalf. Each phase of the foreclosure buying process has good and bad points. The phase that you buy your foreclosed home depends on your goals, needs, and personal style.
The first step in buying a foreclosure is to find your target area. If you are interested in buying foreclosed homes as an investment you want a target area with mass appeal, where properties are likely to sell quickly. If you are looking for a house to call a home, research area schools, crime statistics, the job market, and look for properties that show promise of strong and steady growth. Once you have selected your target area research it extensively. Become an expert on the areas attractions and features. Learn everything you can possibly know about the area.
After you have found your target area the second step is to find a foreclosed property that fits your home buying or real estate investing criteria. There are several ways to find foreclosed properties.
- Search through newspapers looking for notices of default, private pre-foreclosure sales, or auction sales.
- Visit the county courthouse and look for public auction notices or search through the public records archives for tax liens, mechanics liens or foreclosure notices.
- Call up banks and lending companies to find out what foreclosed properties are available in your target area.
- Find a real estate agent with foreclosure experience and ask them to help you buy a foreclosed property.
- Let the Internet be your guide. The Internet can be a gold mine for those searching for foreclosure properties. Using a quality foreclosure listing website may be the best way to find your foreclosed home or investment property. Many of these websites have in depth sections on how to buy foreclosed homes, finance sections, and property reports. Using a wide range of search criteria thousands of property possibilities can be accessed quickly in one simple search.
The third step to buying or investing in foreclosed property is to determine how you will finance the property. If you need to take out a loan, you should begin screening lenders and securing your financing. When buying a foreclosure the best type of lender to work with is one who understands the re-possession process. A knowledgeable lender can guide a homebuyer through any potential pitfalls that may crop up and ensure that the proper steps and procedures are being followed, such as ensuring that the property being purchased is FHA-compliant. Pre-qualifying for a loan is important for a potential homebuyer because it helps ensure that the buyer is in a financial position to purchase a property, and it places the buyer in the strongest possible position to negotiate with the seller of the property. When a potential homebuyer already has pre-approved financing in-hand negotiations with both the seller and the lender go much smoother. Pre-approval gives the homebuyer a concrete idea of what they can afford and shows the seller that they are serious about buying a home.
Once you have located the property determine which phase of the foreclosure process the property is in. If the property is in pre-foreclosure contact the owner. The best way to do this is by mailing a letter. Always show respect, remember the homeowner is going through a great deal a stress. If the property is being sold through auction contact the trustee or county courthouse for auction times. If the property is an REO contact the lender or real estate agent in charge of the listing.
Gather as much information about the property as you can. Research the properties market value, inspect the property if you are able, and perform a title search to make sure there are no additional liens or loans on the property. Use your researching and detective skills to the best of your abilities. Having as much information on the property as possible will enable you to make a suitable and successful foreclosure purchase.