In the last year and a half foreclosures in the United States have been commonplace. Banks and mortgage lenders have many properties they must sell to recoup their loans. At foreclosure auctions, houses often sell for a fraction of their market value. This sounds perfect for people who want to buy a home, but there are some catches. You probably will not be able to get a standard mortgage for a foreclosure sale.
For people with excellent credit ratings and a reasonable amount of savings, auctions can be the perfect opportunity to snap up a house they otherwise couldn’t afford. Lenders may or may not set a minimum bid depending on the amount owed on the loan and how motivated they are to divest themselves of the property. Some current foreclosures are actually worth less than the amount owed on the loan.
If you have no desire to move to another area, the local newspaper is an excellent source for foreclosure auctions. There are also listings of foreclosed properties. It isn’t necessary to go to an auction to save on a foreclosure sale. Government insurers have foreclosed homes for sale. You can visit one of the government websites for a listing.
In some cases, homeowners, angry about the loss of their home may damage the property before they move. Foreclosure auctions do not require codes inspections nor must the property be habitable for the sale. If you buy a home that isn’t habitable, you will have to make the repairs before you’ll be allowed to occupy the house. Many banks and mortgage companies will not finance auction properties. You may need a commercial or business loan.
If you can’t qualify for a foreclosure sale, your real estate agent may be able to arrange a short sale. In a short sale, the bank agrees to allow the seller to sell the property for less than the amount of the loan. In this way, homeowners can avoid foreclosure. It is much easier to get a standard mortgage for a short sale than for a foreclosure auction. This is more like a standard real estate transaction and the owners are usually still living in the home.
Foreclosure auctions involve bidding. You must have ten percent cash or cash equivalent to pay if you win the auction and proof of financing. Most lenders will not offer traditional mortgages for auction sales. Most often you will have to obtain a commercial loan for real estate investment. Only people with good credit or a lot of cash will be able to use auctions to buy property. The down payment and the proof of financing must be presented with the winning bid, or your bid will be voided.
There’s the problem of the previous homeowners still staying the property. Once you buy the house during the auction and the tenants have not been evicted, it falls on your shoulders to get them out of the house and this can be a big headache. Or perhaps the house has been vacated but ‘mutilated’ by the previous tenants thereby draining your pocket for additional repairs.
For those with good credit and enough cash for a down payment, the real estate auction can offer real values. While not for everyone, real estate foreclosure auctions can save new homeowners lots of money and they offer a certain amount of excitement and suspense as well. Remember not to exceed your highest pre determined bid, or you won’t be able to pay for your house if you win.
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