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Foreclosures are a way lenders resort to in order to recover the amount outstanding on a defaulter by selling off or by taking control (repossession) of the mortgaged property. The process begins when the borrower defaults on his payment and the lender files a notice of default, also called a Lis Pendens, against him/her.
The foreclosure process can occur in four ways: The first is the borrower/owner repays the amount owed during the grace period, which is determined by the laws of the state. This period is also known as the pre foreclosure period. In the second way, the defaulting owner sells the property in the period of pre-foreclosure and pays the outstanding amount in order to spare his credit history a blot. In the third way, the property is sold off at an auction towards the end of the pre foreclosure. The fourth way could be the lender taking control of the property either by way of agreement with the owner, or by purchasing (repossession) it at an auction. Such repossessed houses are also called bank-owned, or real estate owned (REO) properties.
To buy foreclosed properties it is important first to identify them. This can be done by logging on to appropriate websites on the Internet and searching for the property status on the property search page. Next comes securing the financing for the foreclosure, then contacting a real estate agent who can guide one through the process of buying foreclosures and the last but not the least is contacting the owner during the pre foreclosure period, the grace period during which the owner can sell the house directly to a third party to spare his credit history a default stigma. One can buy pre foreclosure period properties at a good 20-40 percent discount to the market value.
One also needs to contact the trustee to confirm the date of auction, so that you can in between contact the owner who is in default and work out a last minute deal with him/her. If the property is bank owned, then one needs to contact the asset management department of the lender to know the process for making an offer for their foreclosures.
Finally, if one has never purchased foreclosures before it is advisable to hire the services of a real estate agent who will guide you through the process of making the offer. It is important to know bargain potential by knowing the market value of the property, the amount owed and any other liens or liabilities that the owner has in regards to the property. All this can be known from websites and doing a proper search under the property details section.
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