Buying Foreclosed Houses

February 12th, 2008

One man’s poison might be another person’s meat. In fact this has always been the story of life. Foreclosures are raging across the country causing millions of houses waiting to be sold. This has upset the balance of the real estate market with more houses than buyers. Consequently prices of houses have fallen. This gives an opportunity to many to make a quick deal. But one should move cautiously because there are pitfalls.

Since the foreclosure crisis intensified there have been many auctions that are becoming increasingly popular. Hudson & Marshall specializes in these auctions. Most of the houses sell at 20% below the market price.

When a borrower fails to make mortgage payments for three consecutive months the foreclosure process is started off by the lender. A default notice is sent. A time is given ranging from 30 days to 7 months for the dues to be cleared after which it will be auctioned. The time allowed depends upon the lender and the laws of the particular state. Buyers often come forward to buy the mortgage at this point. If a satisfactory buyer is not found then an auction takes place.

The auction starts with the minimum bid that takes into account the loan together with interest and associated foreclosure fees and legal expenses. Sometimes there is not even a single bid because the price of the property in the current market turns out to be less than the loan amount. If the auction fails then the bank takes over the unit. It then becomes REO or real estate owned and is free from liens. The bank now tries to dispose of it through an auction conducted by bonafide auctioneers who are skilled in the trade.

Interested buyers can obtain the list from the newspapers, auction firms and the banks. The best person to contact is the realtor who can do the sifting and find out the best ones in the market worth bidding for. Hunting through county tax records available at nearest county court house will give a true picture of the health of the property – it liens and tax and other dues.

Having decided on the property it is best to contact the owner directly, make an offer in writing together with the offering of a deposit. Seeing this lender will stop the foreclosure process only too gladly because it is a costly operation.