Understanding the Foreclosure Process

Foreclosures can be pose to be a terrific investment for those looking for a more affordable option, especially in hot-home areas.

Before making the jump to either make a quick buck or thinking that buying a foreclosure is no-brainer, think twice! You need to be properly prepared to navigate through the process and get the most bang for your buck with minimal obstacles.

There are plenty of foreclosure properties on the market currently which can offer some great opportunities for the right person.

Services like RealtyTrac help investors and homebuyers tap into an increasingly popular market by providing easy access to foreclosure and pre-foreclosure information typically your broker would only see.

Type of Properties Available

For those looking to seriously buy a foreclosed property, it’s best to understand some of the basic types outlined here:

• Pre-Foreclosure Properties
  • A property that has received a default notice from a foreclosing lender. The different notices filed during the pre-foreclosure is the Notice of Default (NOD), Lis Pendens (LIS), Notice of Trustee Sale (NTS) and Notice of Foreclosure Sale (NFS). Buying a pre-foreclosure property directly from the private homeowner is the most favorable option for most consumers. The seller is about to get out of the mortgage default without destroying his/her credit, the lender is saved time and expense from foreclosing the property and the buyer gets a below-market price on a home. As the buyer, it also gives them a chance to fully evaluate the property prior to making an offer. Although there are some small disadvantages associated with buying a pre-foreclosure property. Negotiations between buyer and seller can be difficult since the seller may not have wanted to sell in the first place. There is also pressure to complete the transaction before the property goes up for auction by the lender.
• Auction Sales
  • Foreclosure auction sales are typically the arena for professional investors, which are sold to the highest bidder. Buyers are required to be physically present at the auction and be prepared to pay 100 percent of the sale price in cash on the spot. Auctions can bring significant savings, but it isn’t for the faint of heart or uninformed. There is little time to examine the property prior to purchasing. The buyer will be competing against the professional investors and sometimes even the lender.
• Real Estate Owned (REO) Properties
  • Once the lender has officially reclaimed a home, it is classified as Real Estate Owned (REO) by the lender. While REO properties offer more time for evaluation of the property and a more standard bank transaction, their prices are usually fairly close to the full retail value. Thus, yielding the lowest potential for savings.

It’s still definitely possible to find good deals in the foreclosures market. You just need to know where to look and research what you’re exactly looking at. Understand the pros and cons of buying at different stages of the process to be on your way to a successful purchase!