Buying a Foreclosued House

The current status of the housing market is still upside down. People are still losing their homes to foreclosure. It is an unfortunate reality that millions of people must face. On the flip side of the coin, this is a perfect time to purchase a home or invest in real estate through the purchase of foreclosed property.

Most people able to buy up foreclosed property are investors who turn around and sell the houses at a hefty profit. There are also a few individuals that are looking for foreclosures for personal use. It is those individuals this article is geared towards. The article will help you better understand the foreclosure process. And prepare you to enter the market armed and ready to get the best possible deal through the purchase of a foreclosed property. A list of Amazon.com books are also provided at the end of this article. They will enhance your understanding of the foreclosure process and how to purchase foreclosed property.

Buying a home through foreclosure can result in a gold mine of a purchase. Or it could become your worst nightmare. You may purchase foreclosed property through pre-foreclosure, through auction or through Real Estate Owned (REO). Understanding how each of these purchases work make the process less confusing. Before explaining how each of the foreclosure processes work, below is an overview of the foreclosure process:

A foreclosure is a legal process in which a lender or investor takes back the property from an individual who fails to make scheduled payments on property for which they have unpaid mortgage payments.

When the first payment is missed, the mortgage is considered delinquent or defaulted. And again the foreclosure process may begin. The lender is required to send only one letter of default to the individual. The individual has an opportunity to "cure" the debt. That means pay in full the mortgage debt on the property. If the owner does not bring the mortgage payments current within a set period of time , then the foreclosure process continues.

The property is placed in a position to be auctioned. The lender files in the county courthouse for authorization to auction the property. Traditionally, the auction takes place on the first Tuesday of each month on the steps of the county courthouse. Regardless of the weather, the auction takes place on the county steps at a designated time and date.

Pre-foreclosure is when the individual sells the property before the foreclosure process takes affect. The property is sold to an entity who pays the delinquent balance due on the property. Then the payments are taken over and the original owner no longer has legal ownership of the property.

Auction is selling the property by the bid process. The property is bid on on the steps of the county courthouse, or in front of the actual home or at the county clerk office. Most auctions take place at the county courthouse. In most cases the purchaser has not seen the house or know the condition of the house. This is a risky purchase -- buying sight unseen.

REO or Real Estate Owned foreclosure is when the bank or the real estate company own the property.They sell the real estate at the best price they can obtain for its sale. This is considered the safest of the foreclosed properties. In a nutshell these are the types of foreclosures.

A person wants to purchase foreclosed property with full knowledge of actions they must take. Their objective is to gain clear title and ownership of the foreclosed property. They must be ready to deal quickly with obstacles as they occur. The romance of purchasing the property must be minimized. And the reality of purchasing the property must be zoomed into several times over. The reason for this awareness is because a foreclosed property could come with sticky challenges that could result in the lost of the property and the invested money. It is imperative to verify all the legal aspects of the property before handing your money to anyone. Check into the following:

Property Search. A property search tells potential owners all they need to know about the property. The liens and taxes owed will be revealed in the property search. The legal owners of the property will be revealed through property search. Any additional loans made on the property will also be revealed.

Property Appraisal. Appraisal of the property tells the condition of the property. The potential owner will learn about the soundness of the property. If the house is in code requirements. The plumbing and electricity conditions will be identified in the appraisal. And the property lines will be indicated for the real estate.

Along with an appraisal of the property, visit the property yourself, if possible, and get a visual of the condition of the property. Take a visual inspection of neighbors and neighborhoods. What is the crime level in the area? What conveniences are available to residents of the community?

Prepare to do some work on the property. Along with checking legal issues surrounding the house, the individual must know how to do handy work. Handy work may be putting it lightly but the individual must know how to make needed repairs to the house. Or have the finances available to hire someone to make repairs quickly and bring any deficiencies within code. The more the individual does himself, the more savings the individual is likely to recoup.

Cash. Having available cash is important. This is especially true for those wishing to purchase
the property through auction. Be prepared to present a letter from the bank that you have the liquid financial resources required for the auction bid made on the property. Ready cash is also needed for upgrading the house and making it livable.


Redemption Clause. The individual has a grace period in which the house may be taken back from the entity that purchased it through foreclosure. If the individual can provide the back payments and bring the mortgage current, the individual has a right to take back their property. This redemption period is about two years in some states. What that means to the entity that purchased the house through foreclosure is a loss of investment across the board. Any improvements made in the house will be lost and the money paid at foreclosure for the property will also be lost.  If the redemption clause is activated.

Investors in foreclosures protect themselves from the redemption rights of the owner by including in the sale, language that blocks the original owner from coming back and taking the property.

Below are books about purchasing foreclosed property that will help make the process an adventure rather than a maze of legal confusion.

The real estate foreclosure market is a very lucrative business. It always has been. The difference today is the large inventory of properties available for foreclosure investors. Foreclosure investing is better  and safer than investing in stocks and bonds. The risks are there but if the investors knows what they are doing, they will recoup their money many times over.

For the novice investor in foreclosures, do your homework before committing to the purchase of foreclosed property. Learn the ropes fast so you won't become a secondary fatality in the foreclosure market. Many of the properties that are in the foreclosure market are well worth your efforts and many are not.