A foreclosure is a process where the lender that financed the home recovers the amount owed on a defaulted loan by selling or repossessing the property. The foreclosure process starts when the borrower defaults on loan payments and the lender files a public default notice. If you are interested in purchasing a foreclosure, also known as a real estate owned property (REO) or bank owned property, you will need to undergo a buying process that is different than the average home sale. The CHIODO team specializes in the sale of REOs throughout Florida and can help you with this entire process.
General Information About Buying Foreclosures
There are three stages to a foreclosure property. These are: Pre-Foreclosure, Auction and Real Estate Owned.
During the pre-foreclosure stage, legal action has been taken by the lender and the borrower is given the opportunity to settle the contract. At this stage, they can sell the property before it repossessed. The lender sends the homeowner a letter regarding the default after the homeowner has missed their mortgage payment. If the homeowner doesn’t respond, the lender posts a notice of sale of the property at the courthouse.
If the debt is not settled, the property goes to the auction stage. The auction takes place outside and typically attracts numerous real estate investors and prospective buyers.
When the property is not sold at an auction, it becomes a bank-owned, or real-estate owned property for sale. At this stage, the property is owned by a real estate company and buyers work directly with the REO company to coordinate the transaction.
Foreclosure homes are sold “as is”, which means that buyers are responsible for paying for repairs and for getting a site inspection done.
In general, Real Estate Owned properties (REOs) are the least risky in terms of the type of property a buyer invests in because the buyer can fully inspect the property, demand a clear title and the property can be financed by a mortgage. Many banks sell the property through a broker.
Frequently Asked Questions About Buying Foreclosures
Q: What are the benefits of buying a foreclosure property?
A: Both homebuyers and real estate investors can find properties below market value. The properties are typically priced at a 30 to 50 percent discount.
Q: Can I make an offer directly to the bank?
A: Yes, you can make an offer directly to the bank that owns the property by working with a CHIODO team specialist. Our real estate agent can guide you through the process of making the offer.
Q: Do banks with foreclosures offer special financing?
A: Yes, in many cases the bank will offer special financing options for their foreclosure listings.
Q: Is the price of a foreclosure non-negotiable?
A: No, the price of a foreclosure is subject to the bidding process. You can make a lower offer, but the bank may counter bid. A CHIODO Team specialist can help you with make and secure your offer.
Q: Do foreclosures have any additional legal issues or fees?
A: No. After a proper inspection, you will be aware of all the problems associated with the home because they will be listed on a disclosure.
Q: Is the escrow the same as a typical real estate transaction?
A: No. If you are buying from a lender or insurer after the property has been foreclosed on, you still have the option to negotiate the price and terms.
Tips for Buying a Foreclosure
Working with a CHIODO Team specialist can help you get the buying process started. We are here to make the transaction as smooth as possible, and can provide guidance and support with all aspects of buying REO properties and bank owned homes. Here are some more tips for buying a foreclosure:
- Consider your budget. Don’t let the lower price tag fool you into thinking that the house is affordable. You may be responsible for extensive repairs on the home so plan accordingly.
- Research the neighborhood. Make sure you see the house yourself and do extensive research about the neighborhood.
- Find out how long the house has been up for sale. A foreclosure property that has been sitting empty for several months may have sewage, termite and drainage problems.
- Get a private inspection. While banks typically require a home inspection when lending money with a mortgage, you should still get a thorough inspection on your own to make sure you have a realistic assessment of the property.
- Look at the landscaping. The house may have been neglected for a long period of time, which means that vines, trees and bushes could be negatively affecting the foundation and exterior of the home.
Have more questions about buying a foreclosure? Contact a CHIODO Team specialist today to discuss different options available and have all of your questions answered by an experienced professional.
