What is foreclosed home?
Foreclosed home represents a home or property seized and put up for sale by the lender that gave the original owner a loan. Usually, foreclosed homes sell banks when the borrower failing to make mortgage payments and must forfeit the home back to the bank. Home listed as foreclosed means that it’s owned by the bank (lender).
A foreclosed house is one where the owner of the house or the one who lends it ceases the agreement and starts to own the house because of the cancellation or failure to fulfill the mortgage payments. The foreclosed house is therefore owned either by the lender again or given to the state property. This is one of the most common things that can happen; however, after the house becomes foreclosed, it becomes difficult for people to buy it. This is because there is a lot of issues surrounding the house. However, many people believe that the foreclosed house can be bought, and it does not attack any consequences to it. This article will walk through the process of the foreclosed homes and how they work. We will also learn whether it is a good idea to buy a foreclosed home or not.
Previously, foreclosed houses were not something that people would want to buy. They used to believe that there is a lot of stigmas attached to someone getting a foreclosed house. However, with the repeated processes of foreclosed houses, there are many of them now readily available and in the marker estate. It has become less complex to walk through the foreclosed house and acquire one as well. We will look at some of the basics of foreclosed properties first.
How to purchase a foreclosed home?
To purchase a foreclosed home, you need to do the following ways:
- Find foreclosed homes via online real estate searches in multiple listing service (MLS) periodicals, bank websites, or local newspapers.
- Try to buy foreclosed home using a short sale. In a short sale, the homeowner gets permission from the bank to sell his home for less than what he owes on his mortgage.
- Try to buy foreclosed home at an auction.
- Try to buy foreclosed home directly from a bank ( lender) on the open market (REO)
- Try to buy a government-owned foreclosure property.
Basic questions arising foreclosed house:
• What is a foreclosed property?
A foreclosed property is given back to the lender or acquired by the state. This is done when the people living on rent fail to fulfill the requirements or pay the money. In this case, the house is acquired by the state.
How to buy foreclosed homes with no money?
To buy foreclosed homes with no money or a low amount of money, you can try:
- to buy UI foreclosure homes. UI or uninsured status foreclosure indicates a home that requires repairs to meet FHA standards, and usually, it is not in livable condition.
- to use credit cards
- To use FHA loan as a first-time home buyer because they require a lower minimum down payment and lower credit scores than many conventional loans.
• Are foreclosed houses common?
Foreclosed houses were not really common before; however, after 2009, they have become readily available and easier to get in the estate market. It has become a whole new category in the estate market.
• Should I look for foreclosed houses online?
Yes, many online websites are specifically designed to ensure that you can get a foreclosed house of your choice.
• What are the biggest advantages of getting a foreclosed house?
Foreclosed houses are normally obtained at a much lower price. You can get a good place at a relatively low cost.
• Are there any disadvantages of getting a foreclosed house?
Yes, there are also disadvantages as there is a lot of stigma surrounding the foreclosed houses. The houses may not be maintained to the best, and many things may not be in the right order. Besides, acquiring the house can hold many conditions and can be especially lengthy if the state is involved in the process.
• Can we get foreclosed houses by using some state option?
Yes, many foreclosed houses are available with the offset of state funding as well. Financing choices are available, which can be availed to the foreclosed houses.
Where can we find homes that are foreclosed?
There are many ways through which we can find the foreclosed properties. One of them includes looking at the local newspaper and listings as well. However, as many people do not go for foreclosed homes much, they may not be as bold and highlighted as the other properties, so you may really want to read thoroughly to find the desired foreclosed property.
Apart from this, many estate websites and listings would include the foreclosed houses as a separate category. While this was not much common before, it has become straightforward to identify them due to the availability in the market.
You can also search different websites of banks that also have a separate page that show how you can secure financing options if you want to have a foreclosed home. However, the most convenient and easier route to take is to look for websites.
Many websites operate separately and only deal with the foreclosed house. As mentioned above, there is a lot of talk about the foreclosed homes now, and due to the availability in the estate market, there are websites that write about them. There is one common website that includes Home Path, which is a website dedicated to buying foreclosed properties.
When you look for a house and have hired a real estate agent, you should not shy away from asking him/her about the foreclosed houses. This is because estate agents are in direct contact with the lenders and know much about the properties. They are likely to provide you with a good estate property that had been acquired by the state as well.
What is the process of foreclosure?
Typically, there is a whole process of foreclosure, and a house goes through many steps before it becomes a foreclosed property. In many cases, it goes back to the lender, and in many cases, it can go to the state by acquiring it. There are the steps of pre-foreclosures, sales, auctions, bank property, and state-owned processes involved in it. We will walk through all of them here.
There are, overall, a series of five steps that are used in the process of foreclosure.
1. Pre-foreclosure of the house: this is the initial step when the lender tells the borrowers that they cannot live in the house because of a lack of fulfillment of the mortgage payments. In this way, the proceedings have to be begun, and it is to be seen whether the property will be seized by the state or not. There are many incidences where the property is sold to a different person before the state is notified, and therefore the process of pre-foreclosure is avoided. Once the state is notified, it can negatively impact the lender’s part; therefore, many lenders work actively to ensure that the state is not involved. However, many houses in the pre-foreclosure phase are also listed on multiple online websites as well.
2. Sales: A sale will occur when the leader steps down and does not puts large pricing on the property. He/she may keep the house on a short sale in which he/she will accept any amount of money offered for the house, whether it is a large sum amount or not. It can also be way below what the mortgage amount is, and therefore this means that it is merely done to settle the housing property before the state is notified. However, there are many steps involved in it; however, they merely resemble those as done by the mainstream process.
3. Auctions: An auction is held when lending the house notifies the one living in the house of his/her mortgage payment mishaps. In this way, there is an auction held so that the money can be repaid. Auctions are held to raise the money and to fulfill any missing gaps that may have occurred in the money front. When the bidder bids on the highest sum amount, it then goes to sale.
4. Owned by Banks: When the property is not sold immediately through the auctions, the properties are then taken away by the banks themselves. They thus become the property of the bank.
5. Owned by Government: Some of the properties, when not sold, are taken away by the government, and thus the state is involved in the process.
Are houses sold as foreclosed homes sold at a low price?
Yes, households that are sold as foreclosed homes are sold at a relatively lower price. This is because they do not have the same maintenance, and their value goes down in the estate market. One of the advantages of getting a foreclosed home is getting it at a lower price.
After leaving Wells Fargo Bank in 2014, Daniel began a career as a finance consultant, advising companies and individuals on economic policy, labor relations, and financial management.
At Promtfinance.com, Daniel writes about personal finance topics, value estimation, budgeting strategies, retirement planning, and portfolio diversification.
Read more on Daniel Smith's biography page.
Contact Daniel: daniel@promtfinance.com