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The Process for Purchasing a Foreclosed Home
You’ve been searching for homes, and you’ve been seeing foreclosed homes for sale – what does this mean, and how do you purchase one?
Let’s look at the quick facts:
Simple Definition
Sadly, foreclosed homes are seized and put up for sale by the bank that gave the original owner a loan. The home is now owned by the bank.
Pre-foreclosure
This is the first stage in the process before officially declaring a home foreclosed. The original owner has been given legal notice that the process has begun; the only way to avoid the final stage is to sell the property before the mortgage holder takes ownership of it.
If you’re wanting to purchase a home in pre-foreclosure, it usually means approaching the owner and offering to buy it outright. It’s especially important that you remember that the original owner might be running on many emotions – so it’s critical to be understanding.
Foreclosure Auction
If the original owner was not able to sell the home during the pre-foreclosure stage, it will probably go up for sale in a foreclosure auction. Usually these are very fast, so there might not be much time to research the property beforehand.
Bank Owned Property or Real Estate Owned (REO)
When the home has been passed to this stage, patience is important. The bank’s eventual goal is to sell it to make back the unpaid loan amount. Many things need to happen first before a potential buyer can enter this purchasing arena – so if you’re looking to buy quickly, this is probably not for you.
Pros and Cons of Purchasing a Foreclosed Home
Pros:
- Lower prices
- Title is cleared from the bank
Cons:
- Not much time for research – banks usually sell “as-is”, which might mean more repairs within the home
- Depending on the state, the original homeowner can have up to 12 months to reclaim ownership of their home, which would leave your process of buying the home halted
Purchasing a foreclosed home is not for the faint of heart – and if you’re interested or in the process of doing so, it’s important that you have the right real estate agent to help you through the legal jargon.
For more real estate guides, stop by Alliance Title’s Blog.