In the first quarter of 2021, the US foreclosure market had 33,669 properties with foreclosure filings. Some of the properties had default notices, bank repossessions, and planned auctions.

While foreclosures are bad news to the property owners, they are an opportunity for buyers to acquire properties at a much lower price. With the right plan, you can find bargains and purchase a home in the strongest neighborhoods.

Besides bargaining prices, purchasing real estate foreclosure requires a lower down payment and is a perfect chance to build wealth. But do you know how to buy real estate foreclosures?

Check this real estate foreclosure guide for everything you should know.

What Is a Foreclosed Home?

If a property owner defaults mortgage payment, the lender has the legal right to seize control of the subject property and resell it. This process is known as foreclosure.

A foreclosed home, therefore, is a property with a foreclosure filing, whereby the lender has repossessed the property and plans to sell it. Depending on your state, the foreclosure process may take months or even years, so you should conduct due diligence before rushing to invest in a foreclosed property.

Benefits of Buying a Foreclosed Home

Whether you wish to purchase a home to live in, flip and sell, or rent out, you may be tempted to purchase a foreclosed property. But you could be skeptical about the idea because of fear of the unknown.

If you are unsure if you should purchase a foreclosed property, these benefits will give you the answers you need to make the right choice.

The Prices Are Highly Discounted

The foreclosed homes sellers are motivated to sell the property fast and recoup their unpaid loan balance. Consequently, they will list the homes at highly discounted prices to attract buyers.

Furthermore, foreclosed homes are mostly in a distressed condition, which explains their low prices. Their listing prices are often 20% to 50% lower than the market value, and with in-depth research and a good strategy, you can land a cheap home in a great neighborhood.

Foreclosures guarantee investors who wish to rent out or resell their properties a high return on investment.

Easy Purchase Process

As earlier mentioned, lenders are motivated to sell the foreclosed homes as fast as possible to retrieve their unpaid loan balances. The asking prices for these homes are just right, so you do not have to go through a lengthy search for the most affordable deals.

The house selling process is also a bit streamlined, and you do not have to worry about the seller backing out at the last minute. The faster you acquire the property, the sooner you start earning from it if you plan to rent it out.

Affordable Prices Means Low Settlement Costs

You may choose to buy a foreclosed house with mortgage financing, a conventional loan, or use your savings. Considering that the cost of the property is below the market value, it means that you will spend less of your savings or borrow less money to finance the investment.

Furthermore, if you are buying the property from the lender, you can negotiate for a lower down payment and closing cost.

Down payment is the major hurdle for individuals who wish to venture into real estate investment. But that should not be a problem with foreclosures. This makes them a perfect opportunity for beginner investors who are afraid of venturing into real estate investing because of settlement costs.

Fewer Competitors

There are limited foreclosure real estate properties. It takes a while to find them on a regular listing. This means that few investors will bother to look for this kind of investment property, thus less competition.

In most cases, the properties are auctioned to cash bidders. With the right tips and guidance on how to find foreclosed houses and enough funds to pay in cash, you are better positioned to acquire a high-value property at the lowest price.

Cons of Buying a Foreclosed House

Everything that has benefits has a downside too. The major drawback of buying a foreclosed property is the increased maintenance cost.

The property owner has no incentive to upgrade the house to attract buyers. Therefore, you must be willing to spend on any broken fixtures or areas that require an upgrade.

The other downside is the period of redemption. Sometimes, a property may be listed for sale, but it may never be sold. Homeowners are given a period of redemption where they can get their homes back if they settle the unpaid loan within that period.

Real Estate Foreclosure Tips

Now that you understand the pros and cons of real estate foreclosures and you think that it is a suitable investment for you, here are tips to guide you through the purchase process.

Select the Ideal Foreclosure Purchase Process

There are different foreclosure purchase processes to choose from depending on one that meets your needs. It will help if you understand the upsides and downsides of each process before settling for the best.

The main processes for buying a foreclosed house are:

Short Sale Purchase

With a short sale, you buy the property from the homeowner, but at a much lower price than the amount they owe the mortgage lender. Moreover, the bank or mortgage lender must review and approve your offer before completing the purchase.

The main benefit of short sale purchase is that you get the house at a highly discounted price. The drawback is that you may have to wait for a long time before the lender approves your offer.

Buy the House From the Bank

The lender may seize total control of the foreclosed property. This means that you will purchase the house directly from them.

The bank acquires and clears the property title. They also evict the homeowner from the property before listing it for sale.

If you decide to go through this route, it will help if you hire a real estate agent and let the expert deal with the bank. The experts can negotiate and land you the best deal.

Bid at an Auction

Buying a foreclosure house at auction is the fastest way to acquire your dream property. For starters, you don't have to negotiate with the lender or homeowner.

Nonetheless, most auctions will only accept cash payments, so you need to have a significant amount before bidding. On the other hand, if the auction allows you to use a mortgage, ensure that you are already preapproved.

If you decide to purchase the foreclosure at auction, be ready to buy it as-is, meaning that you don't get a chance for inspection.

Hire a Reliable Real Estate Agent

Finding a foreclosure property requires someone who understands the ins and outs of the real estate market. It will help if you hire an experienced real estate agent and let the experts do what they do best.

The agent has been in the market long enough and understands which sites are likely to list foreclosed properties. Moreover, they know how to land good deals and identify scammers, not to forget that with their amazing negotiation skills, the agent will help you buy the house at the best price.

Take your time to look for a credible and reputable real estate agent near you. The best strategy is to check websites with a database of real estate foreclosures in your preferred region. Search for real estate agents with a specialty in such areas as they are more likely to find foreclosed properties faster.

Also, ensure that the agent understands the different purchase methods and can help you settle with the based depending on your needs and budget.

You may also work directly with the lender's real estate agent. This helps you save on commission split. The downside, however is that you may feel insecure because you will not be directly represented by the agent.

It will help if you explain your needs to your agent so that they can quickly find the house that meets your criteria.

Search for the Best Foreclosed House Deals

The constant rise in foreclosures means that you can quickly find great houses that have been seized by lenders. It, however takes time and the right plan to spot the best deals in the market. Understand the best places to look for such properties, which can be:

Bank Websites

Your first search point should be on the bank websites. Most lenders list their foreclosed houses for sale online. The listings include photos of the properties, descriptions, and prices. Some go out of their way to include agent's contacts so you can quickly get in touch with them.

Pay for Foreclosure-Listing Services

Did you know that you can get first-hand information from listing sites at a monthly subscription fee? You are only required to pay a specific amount depending on your preferred site.

With this, you will be among the first persons to know about the listed foreclosures and those approaching foreclosure.

Check Government Listing Site

You cannot go wrong by checking government-owned websites for listings. As soon as you spot the house you wish to purchase, you can make your offer through the agent in charge.

If you decide to check government-owned listings, be ready to purchase the house 'as-is.'

Leave the Search To Real Estate Agents

Hiring a real estate agent is by far the easiest approach. The providers are familiar with the market and are likely to find foreclosed houses easier than you. Furthermore, you get to save time.

Mortgage Pre-approval

Unless you have enough cash to pay for the property, you need to apply for a mortgage. Foreclosure houses move fast, so it will help to have the mortgage pre-approval letter before making an offer on the property.

Having the letter in hand separates you from searchers, and the seller will perceive you as a serious buyer.

The lender will access your income and credit score to determine the amount you can borrow. This way, you can search for a foreclosed property that you can afford to pay with the mortgage plus down payment.

Look for a reliable mortgage lender who understands your needs. And gather the essential documents to speed up the pre-approval process.

Note that foreclosed houses require repairs and renovations. So you need a type of loan that can help with this, such as FHA 203(k), which caters to a significant part of repair costs.

Compare Prices

When looking for a foreclosed property, make sure you can comfortably afford to pay for the purchase and renovation costs. Most of the foreclosed properties are distressed and worth much less than the asking price.

Take your time to compare prices online and settle with the most reasonable based on the house's features and condition. You may also use comparative market analysis to have insight into the recent prices of similar properties.

While at this, pay attention to the speed of home sales and tax assessment history of recently sold properties. Having this information helps you to make the most competitive offer, especially if you are up against cash offers.

Make the Highest Bid

If you notice that the houses are selling fast, you need to stand out among other interested buyers. And there is no better way to do so than by giving the highest offer, backed up by a mortgage approval letter.

The foreclosed houses are mostly discounted, so you don't have to worry about reaching the seller's asking price. But pay attention to the location, size, and condition of the house before going all out. Ensure that the property is worth the asking price or even more if there are numerous offers.

Pay Less for High-Value Property by Learning How To Buy Real Estate Foreclosures

If you dream of becoming a homeowner, but your budget is tight, purchasing a foreclosed home could be your way out. You have a chance to buy a high-value property that you could never afford under normal circumstances.

If you invest in the house's maintenance, you will earn unmatchable returns on investment should you decide to resell the property in the future.

The above guide answers all critical questions on how to buy real estate foreclosures. You have no reason to be left out.

Keep reading our guides for more insightful tips.

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    Homesgofast com

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