Buying a home in foreclosure could be a great way to get more home for your dollar. Learn more about how to buy a foreclosure property in this guide.
If you’ve never considered buying a home that’s in foreclosure, you may be shutting down an avenue that can have financial benefits. While a foreclosure sale is like any other home sale in many ways, there are special considerations when you buy a foreclosure property. Let’s take a closer look!
🤔 What is a foreclosure?
Life can throw unexpected events in the way of making timely mortgage payments. If a homeowner doesn’t make their mortgage payment for an extended period of time, they may become delinquent enough to default on their loan and start the foreclosure process. It can take three to six months of missed payments before a mortgage company begins to take action.
Common Reasons for Foreclosure
- Job Loss
- Job Transfer
- Expensive Repairs
- Excessive Debt
- Medical Bills
🏡 Why buy a foreclosure property?
A challenge that many first-time homebuyers face is the need for a substantial down payment. A foreclosure property can be a good option because it may offer some relief when it comes to the necessary budget. Investors purchase homes in foreclosure, renovate them and sell them for profit.
📱 Contact Brock Realty Inc.
📋 Points to Consider
- Post-sale repairs may add to the cost of the home.
- Sellers are required to give the history of the property in most cases.
- Ample time should be given for necessary inspections.
- The foreclosure sale process can take additional time.
💵 What are financing options?
You may be able to get a conventional mortgage loan to finance a foreclosure property if it’s in good condition. In this case, you can expect to need a significant down payment. If you decide to go through an auction for the home, you’ll want to have cash on hand.
🏦 Foreclosure Types
The home being sold is on the market for less than the balance of the current mortgage during a short sale. Short sales take additional time and require more paperwork, but some homeowners prefer this method if they are trying to limit credit damage.
Some federal agencies sell properties through the foreclosure process. Check with agencies like Fannie Mae, Freddie Mac, FHA, and the VA. Often, the price is below market value, has a lower down payment, and is easier to secure.
Real Estate Owned (REO)
A property that is real estate owned may be held by a bank, government agency, or government loan insurer. This happens most often for homes where the amount owed is higher than the current market value.
The foreclosing lender considers the mortgage loan balance, interest, and additional fees when deciding on an opening bid. If no bids are higher than the opening bid, the property is purchased by the lender’s attorney and becomes an REO property.
⌚ What can I expect buying a foreclosure?
Most homebuyers are anxious to settle the sale and move into their new home, but it’s important to remember that when you buy a foreclosure property you may need to wait a bit longer due to required paperwork.
Purchasing the property through an auction will require a cash down payment and may take several hours to get all the paperwork finalized. You can help make the process smoother by having all the necessary documents ready at the time of the sale.
👨💼 How can Brock Realty Inc. help?
We’ve touched on some of the basics of buying a foreclosure property, but you may have additional questions before making a decision. Give us a call at 941-313-1234 to get the answers you seek and discuss how we can help make the home buying process easier.