Foreclosure is Just as Interesting as it is Complicated
If you are a frequent reader of our blog you have most likely noticed that we constantly talk about financing options, sales, and rents. Most of the stuff is about making money off your property or benefiting in any other way. This time we will address a rather important issue and will highlight the main characteristics of a foreclosure.
This is a topic everyone wants to avoid in their life but becoming familiar with its outlines can be quite useful. In all fairness, an unfortunate series of events for someone opens up a lot of opportunities to someone else. This is exactly what we will see in our piece about foreclosure below. It pretty much depicts the nature of the real estate market and the harshness that it can have.
Here's what we need to get out of the way immediately: Foreclosure is used for two things – a property and a process. Both things are somewhat connected and often times you might encounter the phrase "foreclosure property". It is perfectly normal and you find out why if you read on. We will begin by describing the whole process or at least its initial stages.
If a homeowner falls behind their mortgage payments, the lender (typically a bank) can claim the property as collateral. Of course, this doesn’t happen overnight and there is a certain mechanism to be followed. You shouldn’t think that if you somehow miss one payment of a few hundred dollars you will automatically lose your home. You simply need to be aware that if things go wrong, the bank will attempt to sell the property in order to recover what is owed.
Without going into details we can simply mention that before you lose your home, your banker will sit down with you and will try to sort the issue. One option is Loan modification, then they will talk to you about a short sale and eventually, loss mitigation will come up. After all of these do not help then the foreclosure process begins.
After all the legal fillings take place and still no agreement is reached then the property is noticed for sale. Notifications go in three directions. First, they go to the borrower, then they are posted on the property and typically also published in a newspaper. This is to notify the public that a foreclosure property is for sale or should we say it is being actioned.
Depending on the country and its legal system the sale of a foreclosure property is held by different parties. In some communities you will see the auction being held by a court, others are hosted by the county or maybe a trustee. Finally, an online auction service is also an option and it is becoming more popular in recent years.
The rules of this auction are rather simple. The property is won by the highest bidder. They have a short deadline in which they are required to pay the price in full. If somehow the property doesn’t sell during the auction, then the lender (the bank) takes ownership of the foreclosure property.
This is basically the process of a foreclosure. Now if we are to talk about it in a sense of property then it gets both interesting and tricky. Any person can take part in such an auction as they have a chance to buy a property below market value. However, a number of things need to be taken into consideration before attempting to spend any money in a live auction for a foreclosure property.
Do your due diligence beforehand and try to dig out as much information about the property as possible. One of the most essential things to do is see if there are any outstanding liens on the property. Such might be Equitable Lien, Tax Lien or Property Lien. Why is that so important? Well, you are the one responsible to pay all the liens and fees once you obtain ownership of the property.
It is best if you approach this live auction as any other purchase of real estate. That being said, you should explore the area around the property and see if it is up and coming. Find out about the history of the house and see if it is surrounded by parks and schools. Your goal is to find as many elements tied to increasing the market value of the property as possible. After all, the right way to think about such a transaction is as if you are making an investment.
There will be other hidden costs related to this property once you buy it. You should think about them before you register for the live auction as it is best if you set a maximum bid you are willing to make. Determine what type of sum you are willing to spend by keeping in mind the approximate expenses you will have after the purchase takes place. You need to think about:
Liens and fees
This list is not complete at all and some more unexpected expenses may appear at any time. What’s more is that when you show interest in obtaining a foreclosure property, no house will be open for a visit. You will be granted zero access to the property prior to the sale so investigate as much as you can from the outside. Trespassing is against the law.
If you are not sure how to approach a live auction or are unaware about the documents you need in order to buy a foreclosure property, you can always hire an attorney or consult with a real estate agent. Most experts keep a close eye on those things and will help you with dates and locations of such live auctions.