When a homeowner is unable to make mortgage payments, the lender who holds their mortgage is often forced to foreclose on the property. In these cases, the court orders a public sale of the foreclosed property with the proceeds going first to the mortgage holder and then to other lien holders. If you are considering investing in homes that are in foreclosure, there are some things you should know about this type of investing, including: - If you think you can buy a foreclosed home for pennies on the dollar, you’ll be disappointed. Occasionally, you may find foreclosures at 30 to 40% below market value, but most foreclosures sell for 5% below market value.
- If you are purchasing from the lender who holds the mortgage, that lender is interested in getting back the money that they are owed. But, the lender may make the home more attractive by waiving closing costs, offering special interest rates or a lower down payment.
- Investing in foreclosures requires some time and research and patience. The foreclosure process is often a complex one. Don’t move forward with a purchase until you have addressed all the issues that will ensure that you are making informed decisions.
- Since the foreclosure process usually starts after the homeowner has fallen behind on payments, it may be a year or longer before the foreclosed home is actually put on the market. Keep in mind that home maintenance issues have probably been ignored during that time.
- A foreclosed home in poor condition may have a low price tag, but don’t underestimate the time, cost and frustration that may be involved in making the home habitable.
- It is important that you know about any liens or unpaid taxes for the property. You’ll need to establish who will be responsible for those fees.
- In a down real estate market, you’ll often find foreclosed homes in a variety of neighborhoods, from low income to affluent communities.
And, the list above covers only some of the key issues. The foreclosure process is usually a complex one. And, you may find that a broad review of properties for sale in your desired area will identify “good deals” for homes that aren’t in foreclosure. When you’re looking for homes in foreclosure, you will be much more successful working with a professional who is experienced in navigating the foreclosure process. The last thing you want to do is close on your “great deal”, then find that issues you hadn’t addressed reduce the return on your investment. Feel free to call us at 310-863-9979 or use the form below to send an email. Take advantage of our expertise to make sure you’re just as happy about your purchase after closing as you were beforehand! Nellie & Yanni |