Buying a Foreclosed Home
Are you in the market to possibly buy a foreclosed home, your in luck. A foreclosed home might be in move in condition, or it might be a home that you need to take down to the studs. Either way, a foreclosed home can be a great investment.
What is a Foreclosure?
A foreclosure is a home is owned by the lien holder (lender), and is up for sale with that lender.
What Does Foreclosure Mean?
A foreclosure takes place when a home is seized and put up for sale by the lender. When you see a home listed as foreclosed, it means that it’s owned by the lender.
Every mortgage contract has a lien on your property. A lien allows your lender to take control of your house if you stop making your mortgage payments. Foreclosures are typically the result of the homeowner being unable to keep up with their mortgage.
Buying a foreclosed home is a little different from buying a house owned by a homeowner.
How Does Foreclosure Work?
Foreclosure is the process by which a lender takes possession of a home when a homeowner fails to make their mortgage payments. It has several stages, which are important for a buyer to understand when considering a foreclosure.
- Payment default and notice of default: Payment default occurs after the homeowner has missed at least one payment, and after several months of missed payments, a homeowner’s entire mortgage can default. This typically initiates the preforeclosure stage of the foreclosure process. A notice of default is usually sent by the lender after 90 days of missed payments. Foreclosure referral timelines will vary based on the contract agreement as well as the policies of the lender and investor in the mortgage. A homeowner is often given time to work out a new payment plan with the lender before the home is foreclosed and put up for sale.
- Notice of trustee’s sale: The lender must record the impending sale with the county and publish news of it in the local paper. This is one way of finding a foreclosure to buy, although an online search will generally be more effective.
- Trustee’s sale: The lender attempts to sell the property at public auction.
- Real estate-owned: If the property does not sell at auction, the bank will become the owner. They will then attempt to sell the property. For most people looking to buy a foreclosed home, especially those purchasing with a VA loan, this is the stage of foreclosure in which they will buy.