With the housing bubble burst and the subprime mortgage crisis, millions of homeowners found themselves unable to make their mortgage payments. Many found themselves owing more on the house than the home was worth. Many just walked away from their homes. As a result of these complicated issues, millions of homes were foreclosed.
While this isn’t the only reason for which homes are foreclosed, it has been a widespread one. With all the foreclosed properties, there has also been extensive interest in buying these properties at a bargain price.
It is true that foreclosed properties can be priced at a significant discount, but they are also a much riskier investment. Before making an offer on a foreclosed property, do your due diligence.
Things you must do before buying a foreclosure:
Do a title search - make sure that when you purchase a foreclosure that you are the only person who has any ownership claim
Check for liens - find out if there are any liens against the property because you will be responsible for paying them
Check for a second mortgage - you don’t want to be surprised by an extra mortgage that you will need to pay
Know how good of a “bargain” you’re getting - foreclosures are sold “as is” and in many cases you will not be able to do a proper inspection. You may end up paying thousands of dollars repairing the property before it is fit to be lived in.
It is also important to consider that there are different types of foreclosure properties and each type comes with its own advantages and disadvantages. The different types of foreclosure purchases are:
Real Estate Owned (REO), also called “bank owned”
A pre-foreclosure is when you buy the home directly from the homeowner, before the bank officially forecloses. This type of purchase does not require as much capital as other foreclosures. Also, since you are purchasing straight from the homeowner, you will be able to gather all of the necessary information, such as inspection reports, title information, etc. that may not be available with other foreclosure properties. Once you take over the mortgage, you will be responsible for all future payments as well as any overdue back payments.
A foreclosure property will usually end up at an auction. Real estate auction practices vary by state but common practice is for the auction to be held on courthouse steps, in front of the foreclosed home, or at the county clerk’s office.
Real estate auctions offer the best chance for a great deal but also hold the greatest risk. Auction properties are sold as is, with no opportunity for potential buyers to perform inspections. When buying a home at auction, the buyer must pay cash, usually a cashier’s check. It is also possible that there may still be tenants living in the home. In such a case, you would be responsible for the often costly eviction process.
Once a foreclosure has gone to auction and failed to sell, it becomes a Real Estate Owned, or bank owned, property. Most homes do not sell at auction, most fail to even get any bids.
An REO property is the least likely of the foreclosure properties to represent a bargain, but it is also the least risky. The property can be fully inspected, any title issues can be found and dealt with, and the sale can be subject to a mortgage. REO properties also tend to be in better condition than other foreclosure properties.
Another thing to keep in mind when purchasing a foreclosure is that some states have a redemption period that allows the original owner to buy back the property by paying the remaining balance owed. You may be able to have this redemption period waived, so check the state laws on this topic before purchasing.
Still interested in buying a foreclosure property? If so, always do your research before purchasing!
We have had a working relationship with George Kammerer for over two years. We first met him when he showed us a rental property. He was immediately warm and welcoming, and the experience was like we were being shown around by a friend. Over the next 2 years he continued to help us as we looked into transitioning from renters to homeowners. He was always quick to answer any questions we had, show us properties, and educate us on the next steps to take and refer us to reputable companies. He always went above and beyond for us even when he wasn't getting anything in return, and we are so thankful and grateful that he helped educate us and send us to the right people. We ultimately purchased the same rental property that he showed us 2 years ago, and we wouldn't have gotten there without his help, guidance, and expertise! George is friendly and knowledgeable without being pushy or condescending. He knows the area well and will go above and beyond to help you find what you are looking for. I would work with him again and 100% recommend using him for your home buying needs!Joel & Jessica Bowman
If you are moving locally or from out of state, do yourself the biggest favor ever and engage the services of George Kammerer. George's knowledge of the area is unsurpassed, and guided us to an area that we described we were interested in living and suited our specific needs. Since we were moving from out of state, the timing was critical that we could coordinate our time and George's to the maximum. He also is remarkably quick to respond to any email or text that you submit. He is the first realtor [we've used] that truly wants his clients to be happy! He asks questions that are relevant to finding the house that you expect to find within the price range that you specify....George does not "push" nor does he "fast talk" you into making a hasty decision. He is a very patient man and has a background that can assist you in answering questions you may have while reviewing a home. I believe my husband and I are "sort of picky" and we would rate George a 5+ in every area shown above.Ruth VonDreau
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