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The process of buying a foreclosed home is slightly different from the process of buying a non-foreclosure home. If you want to invest in foreclosures it is important to understand the different ways by which to purchase foreclosed properties.
There are three main ways to buy a foreclosed home.
Some delinquent homeowners may want to sell their homes before facing an actual foreclosure. In this instance, the homeowner, in agreement with the lender, agrees to sell the home for less than the amount owed on the mortgage.This is called a short sale.
Short sales are “pre-foreclosures”, of sorts. A short sale is when a homeowner in distress sells their home for less than what is still outstanding on the mortgage. The buyer of the home is a third party and not a bank. All the proceeds from the sale go directly to the lender.
In turn, the lender can choose to either forgive the difference of the sale price versus the outstanding mortgage balance or get a deficiency judgment against the borrower. In the case of the latter, the homeowner would have to pay the lender all or part of the loan difference.
By broadening your home search to include short sales, you can identify homes that may be sold at a discount.
Another way by which you can invest in foreclosure homes is by buying the home at auction. From area to area, the legal requirements for the sale of a foreclosed home at auction may differ. If you plan to buy at auction, you’ll want to be familiar with your area’s customary judicial proceedings.
Before you attend an auction to buy a foreclosure in WA, OR, ID, or CO, make sure to do your homework and get familiar with all the pertinent documents involved and transaction details. You may also want to get some advice from a seasoned real estate agent or lawyer who is well-versed in buying and selling foreclosed properties.
Research things like the value of the property, the amount that is still owed on the mortgage, and if there are any liens on title. The last thing you want is to deal with liens after being named the winning bidder.
Always double-check the details of the auction before you attend, as they can sometimes be delayed or cancelled altogether. You don’t want to dedicate your time to an auction that isn’t even going to happen. There could be all sorts of reasons for the cancellation of an auction, such as the lender being unable to get all the necessary documentation on time, or the homeowner requesting more time to do a short sale instead of leaving it to foreclosure.
If you come out the winning bidder, you’ll need to wait to get your Certificate of Title. This can take up to a week or more to complete. In the meantime, the homeowner can still object to the sale and pay up what they owe to take back their rights to the property. Make sure not to do anything to the house until you have this Certificate of Title in your hands that states that the house is yours.
Buying after the auction means buying bank-owned properties in Washington or Idaho. This can be the most lucrative and safest means of investing foreclosure properties. This is because lenders often reduce the sales prices of their home inventory in order to “sell it quickly”.
It can be expensive for banks to own foreclosed homes, and few banks are equipped for managing owned homes. Check with your local real estate agent to see what, if any, bank-owned homes are available for sale in your area.
Before you even bid on the property, do a drive-by to check out the property itself, the lot it sits on, and the surrounding neighborhood. Foreclosures are sold in as-is condition, so knowing what the place looks like — at least on the inside, since you can’t go in — can at least give you some idea of the type of issues you may have to deal with after taking possession.
You should know how much you can afford to spend on a home purchase, and getting your financing in order will help. As such, you should have a certain amount of liquid cash readily available. Most auctions for foreclosed properties require payment in the form of a money order, cashier’s check, or cash.
You’ll need to pay that amount in full. While some auctions may allow a percentage to be paid upfront and the rest at a later date, others may require the full payment up-front. So make sure you’re able to come up with the full price of the home before bidding.
The process of buying a distressed home in Colorado or Oregon is different from the process of buying a “traditional” one. Therefore, regardless of which path you follow to buy a foreclosed property, have an experienced real estate professional on your team.
Are you curious about mortgages, or are you ready to apply for one to buy a home? If so, Sammamish Mortgage can help. We are a local mortgage company from Bellevue, Washington, serving the entire state, as well as Oregon, Idaho, and Colorado. We offer many mortgage programs to buyers all over the Pacific Northwest and have been doing so since 1992. Contact us today with any questions you have about mortgages.
Whether you’re buying a home or ready to refinance, our professionals can help.
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No Obligation and transparency 24/7. Instantly compare live rates and costs from our network of lenders across the country. Real-time accurate rates and closing costs for a variety of loan programs custom to your specific situation.