How to Buy a Foreclosed Home

In real estate there are multiple ways to buy a house or property. You can buy a house or property that is sold on the market in a conventional transaction. Buyers can also buy real estate by first renting it and then agreeing to buy it once the rental term is up. People can buy real estate such as fixer uppers, commercial properties and duplexes, and four plexes.

One of the most common ways to buy real estate nowadays due to the housing bubble burst and recent recession is a foreclosed home. A foreclosed home is a house that has been seized by the lender due to the buyer/owner’s inability to pay the mortgage. In this situation the buyer has not made a payment for the mortgage for three months and is now 90 days past due on the mortgage. As a result the lender takes the homeowner to court and by law is allowed to seize the home. This can be devastating to the original occupant, and burdening for the lender but it can also be beneficial for the parties involved.

A popular way to buy a home in foreclosure is to buy it before the lender officially seizes the property. Prospective buyers can get a listing from the county recorder’s office of homes on the verge of foreclosure and contact the distressed owner. They buyer usually approaches the owner and negotiates with him/her. The two parties work out a deal where the buyer can give the owner a lump sum and enable the distressed owner to pay off the mortgage and start over again without going through the process of losing the home and getting significant blemishes on their credit. A buyer can also rent it, pay the mortgage on time and pay any past due mortgage payments and enable the owner to get an income while he/she gets another property and eventually sells it within a few years. This process and way is a bit tricky and challenging though.

Another way to buy a foreclosed home is to contact a real estate agent who is experienced with foreclosures and have them assist you in locating foreclosed homes. You can also look at newspapers and magazines under the real estate section for foreclosed properties. Once you find a property to your liking you contact the lender and request to purchase the property. In this case you usually get the property inspected to make sure it is in livable condition. The next thing you do is request the agent to give you comparables of foreclosed properties in the area to make sure that the asking price is reasonable and a legitimate bargain. You must also check to see if there are any liens or past due/back taxes on the home. The rest of this process is very similar to a conventional home purchase. You first submit your credit report and get prequalified. Then you fill out and submit a mortgage application to get reviewed. After this you then get approved and give the lender the down payment, pay the closing costs, get the property in escrow and then move in.

A third way to purchase a foreclosed home is to network with real estate agents and investors at investing events. In this situation you would talk to investors and agents who know about foreclosures in the area and they then show you the information about the foreclosed home and engage in the process mentioned above.

You can also buy a foreclosed home through a foreclosure auction. When you go to an auction, the county clerks tell you about a home for sale and then you bid on the property. The winning bidder gets the property and he/she needs to pay the bin amount up front and right then and there at the auction.

There are a good four ways to buy a foreclosed home and these ways can be very beneficial to the seller, buyer and lender.