Foreclosed Property Overview c/o lawyers.com

Posted in Guides on June 5th, 2010 by admin | No comments
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Sign Of The Times - Foreclosure
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Foreclosure occurs when a lender or other lien holder (person or organization that has the right to seize your property for payment on a debt) takes possession of a property because the property owner has failed to make regular, timely payments, and other efforts to collect the money have failed.

Most people know that foreclosure can occur when a homeowner fails to make mortgage payments, but foreclosure can also occur if a homeowner fails to pay property taxes, homeowners’ association assessments or contractor’s bills.

After a creditor takes possession of a home through foreclosure, the creditor usually wants to quickly sell the property, rather than bear the expense of maintenance, security and upkeep. If you are a potential homebuyer, you may find good deals on homes being sold through foreclosure.

You can find information about homes in foreclosure from:

* Local newspapers
* Subscription newsletters
* The county deed recorder’s office
* Lenders’ Web sites

Buying from a Bank after Foreclosure

There’s little risk involved with property a bank has seized through foreclosure. The bank will generally pay any other outstanding debts, such as property taxes or amounts owed to the IRS, in order to sell the house with a clear title. Plus, the bank will have already evicted the tenants or former homeowners, and appraised the house before attempting to resell it.

A bank has the flexibility to negotiate on the selling price, down payment, interest rate and closing costs. Added together, these factors can make a big difference in whether you can afford a home, especially for first-time homebuyers.
Buying from the Homeowner Prior to Foreclosure

If you can communicate with a homeowner whose property is facing foreclosure, it may be possible to buy a house by giving the homeowner a small amount of cash in exchange for any equity in the house. You’ll then be responsible for paying any outstanding debts.

But it’s important to thoroughly check out any existing liens or other debts on the property, so you know what you’re getting into. You may be able to negotiate a discounted settlement with any lien holders.

You’ll also want to inspect the property and estimate the costs of necessary repairs. If the costs of paying off the lender, cashing out the homeowner and making repairs are more than the fair-market value of the home, it’s a bad deal.

If you decide to purchase the property directly from the homeowner, it’s important to have a local real estate lawyer draft the purchase agreement.
Buying at a Foreclosure Auction

Buying at a foreclosure auction is the riskiest way to purchase foreclosed property, and shouldn’t be attempted by a first-time buyer.

You may not be able to inspect the property, and will likely have to come up with the entire purchase price in cash in a short period of time (sometimes measured in hours rather than days). Plus you’ll still end up owing any unpaid property taxes and junior liens (debts put on the property after the debt which caused the property to kick into legal foreclosure).

Buying at auction also comes with the possibility that the former owner will exercise their right of redemption by coming up with the cash to buy the house back within a certain period of time. The IRS also has 120 days to redeem the property if back taxes are owed. A local real estate lawyer can fill you in on the redemption laws in your state.

If you’re tempted to buy at a foreclosure auction:

* Research the condition of the property and any existing debts such as liens, unpaid taxes and previous construction debts, by ordering a full title search on the property
* Scope out land use problems such as zoning or toxic waste issues
* Find out how the auction process and rules work
* Sit in on some other auctions ahead of time
* Decide what your maximum offer will be and don’t go above it
* Arrange any financing you may need ahead of time

Buying a HUD Home

The US Department of Housing and Urban Development (known as HUD) often has houses for sale which are sold to the public after HUD or FHA mortgage foreclosures.

HUD properties are sold “as is” on a cash basis through a conventional lender other than HUD. You can only purchase HUD property through an approved HUD broker or agent, who will submit an offer for you. Buyers can also request that HUD pay some or all of the financing and closing costs.

HUD maintains an online list of homes for sale.
Disadvantage to Buying a Foreclosed Home

One disadvantage to buying a foreclosed home is that the property may be sold “as is,” so it’s important to inspect carefully and budget for any needed repairs. As foreclosure rates have increased, some unhappy homeowners facing foreclosure have been known to damage a home before moving out. Before buying a foreclosed home, it’s important to get a complete assessment of all damage and understand how much it will cost to repair the home.

source: lawyers.com

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