Understanding Foreclosure Sales: Where is the Bargain?
If you are a new homebuyer looking to break into the housing market, foreclosure sales may be the best way to find the home you love at a price you can afford. Homes that have gone into foreclosure can also be diamonds in the rough for the investors who will use the property for a rental or hold onto it until the market takes a positive turn and he can sell it for a profit. However, foreclosure is a complex process, and you must have a pretty good idea of the steps involved before you are ready to take advantage of the bargains to be found. There are three different types of foreclosure sales that we will cover here; foreclosures, short sales and REO's.
Foreclosures
In the case of a foreclosure, the homeowner already has a notice of default filed against him, which is a matter of public record. The public records listing at your local government office or in your local newspaper are the perfect source for foreclosure sales. This notice means that the lender has issued a notice to the borrower that he must bring the loan current within a period of time or the property will go to public sale. These types of foreclosure sales are most frequently handled through a public auction, where people can bid below market value for a home.
Short Sale
This type of foreclosure sale is completed after the notice of default has been issued but before the home goes up on the auction block. A potential buyer may approach the homeowner with the intent of purchasing the property directly from him. Short sales are a desirable type of foreclosure sale for both the borrower and the lending institution because it is a less expensive way for the lending institution to settle the loan and it can keep the borrower's credit history clean. You can find foreclosure sales at this stage through public notices, a real estate agent or a lending institution.
REO's
REO stands for real estate owned, and pertains to property that is now owned by the lender. This type of foreclosure sale takes place at the end of the foreclosure process, and is done through the lending institution and its representative, and the prospective buyer. Since banks are in the business of lending money and not managing property, most institutions will be highly motivated to sell the property and a buyer can often get a bargain at this stage of the process. However, the home has probably sat vacant for some time, and may need extra work to get it back in shape.
Foreclosure sales can be a wonderful opportunity for new homeowners to find the house of their dreams at a price they can afford. If you are in the market for a new home, check out the possibilities in foreclosure sales in your area.
