What is a Foreclosed Home and What Do You Need to Know Before Closing?

Buying a home at an auction or from a lender can make you think like you are getting a major discount but purchasing a foreclosure property can be a complicated transaction.  So, before you think about buying a home, find out what you need to know!

What is a foreclosure property? A foreclosed property is when a lender or lien holder seek to take a property from a homeowner to satisfy a debt.  The lender can decide whether to take ownership over the property or put the property on the market to pay off the debt.  The lender isn’t always looking for the top dollar on the home, just a fair price that will cover the unpaid mortgage.

What is pre-foreclosure? The pre-foreclosure is the period after a default notice has been sent to the homeowner and before the property is sold at a foreclosure auction.  During this time, the owner of the home may be working out a way to fix their loan default or hoping a cash buyer will purchase the property before it goes into foreclosure.  This phase can be the most difficult phase during which to purchase a distressed home- you will be dealing with the owner and not the bank.

How does a foreclosure auction work? If you’ve never attended one before, you may want to go to a few to see what they are really like and get a feel of what you can expect during the auction of the home you want.  Some auctions are small trustee auctions that don’t take long while others are held by large auction firms and include multiple properties.  When you find the right property, contact the auctioneer or trustee to determine how much money you need to bring to the auction as the amount can vary. 

How to find foreclosure properties? Foreclosure properties are usually listed online on many different sites.  You may have to change your filters to find them.

Before you get started you should know…? Foreclosure homes are sold “as is” which means they don’t come with an inspection, home warranties or any other items that may protect you during a home sale.  Before you buy, you will need to know how much it will cost you to make the livable.  Lastly, make sure you hire a title company to research and cure title problems before closing on the property as lenders usually clear the title listing in a foreclosure transaction.