The Lowdown On Buying Foreclosures
Buying foreclosures is a popular subject of discussion these days
. There are tales of huge savings and great deals. Did you know that there is more than one kind of foreclosure? For example, there are REO foreclosures and there are foreclosure sales. Here are things to consider about them.
Foreclosure auctions
When a homeowner defaults on his mortgage loan, it may go into foreclosure. The lender or bank, will sell the property at auction. Highest bidder gets the home. If you bid, your bid must usually include the balance on the mortgage loan. It will have to include taxes and foreclosure fees, also. These amounts will make sure that the lender does not lose money on the sale.
In a foreclosure auction, you will most likely, have to pay cash. If you win the bidding, the property will be yours, as is. As is, means in the current condition and no guarantees. You may have to evict people from the property. There may also be liens on the property. These deals usually favor real estate investors. Consumer purchases may be difficult.
These types of auctions are commonly unsuccessful. The lender will have to take possession of the property. That leads to the next type of foreclosure.
REO
An REO foreclosure is a real estate owned deal. After an auction has failed, the bank or lender now owns the property. This does not mean that there was a problem with the house. It only means that no one bid on the property. The previous owner may have lost his ability to make payments.
The bank does not care to own the house. The longer they own it, the longer they make no money from it. First time homeowners often buy houses this way. There is not much risk involved in the purchase. The lender is the seller. There will be no back taxes to worry about. No liens will be on the property. No one will be living in the house. The bank will be interested in selling the house as quickly as possible. You can save money with this method.
Often times, you can save a lot of money on these deals. It is not uncommon to save as much as twenty percent. You can also get favorable mortgage terms, like lower interest. You may have a small down payment also.
In Closing
Buying foreclosures can be a profitable and enjoyable experience. It may vary from house to house. Real estate investors may do well at a foreclosure auction. Consumers may do well with an REO foreclosure deal. You can get a good deal, if you do your homework.
by: Kenn Fong
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