Due to the shortage of inventory in Nashville, many homebuyers are taking the next step and searching for properties that are not listed. One of the sources consumers are heavily interested in is pre-foreclosures. Zillow lists pre-foreclosures on their site with pending or past foreclosure dates and sometimes auction information regarding the proposed sale date. So, what's the problem for consumers adding these "pre-foreclosure" properties to their saved searches?
1. A pre-foreclosure is not guaranteed to foreclose.
I've worked with foreclosures and short sales, and have seen many foreclosure/auction dates come, go and get postponed. The owners of these homes, still have options: 1)They can choose to catch up/payoff the default; 2) They can choose bankruptcy; 3) They might be working on a loan modification or some work-out plan with their lending institution; 4) They could short sale their home. Either of these would prevent or significantly delay the foreclosure process.
2. A pre-foreclosure's timeline of returning to market as a foreclosure is unknown.
The foreclosure date has been set and the property is auctioned locally on the specified day. If the property was not purchased at auction, it returns to the bank for them to liquidate. However, each bank's process and timeline from auction date to listing for sale in MLS is different. Sometimes, the bank has to work out additional title or lien claims. Some banks hire an agent to start the listing process, which may include evicting the current homeowner, tenant or resident.
If there are personal belongings left at the property, it has to be reported and must remain at the house for 30 days untouched, to give previous occupant a chance to recover. After that, trash outs are ordered, appraisals and bpo's are done and that can take 30-60 days to complete. Some banks hold properties for 6-12 months going through the pre-marketing process before it is re-marketed to the public.
If you need to move in the next 2 months, waiting for a pre-foreclosure to foreclose, may not be the strategy you want to take, unless you can pay cash at the local auction.
3. A pre-foreclosure may not be in move-in ready condition.
First, let me say that more banks are painting and replacing carpet and sometimes certain kitchen appliances before a home is marketed. However, some banks are not, and they are selling the properties as is.
As a buyer, you must purchase the property in it's as-is condition and plan to make repairs after you close on the home. You will still have an opportunity to do a home inspection prior to purchase, however, based on the type of repairs needed and the type of loan you are getting, your lending institution may not want to finance the home unless certain repairs are completed.
4. A pre-foreclosure/foreclosure/short sale can not be subject to a home selling.
If you have a home to sell, a pre-foreclosure/short sale or foreclosure may not be where you want to start, unless you can buy the home without selling yours. If you don't have to sell your home in order to buy another home, then adding pre-foreclosures and foreclosures to your search is fine. However, if you do need to sell your home before you buy your next home, saving or putting an offer on a pre-foreclosure or foreclosure is not the best idea. Why:
- Banks want to sell foreclosure properties as fast as possible. If they take your offer, and your home doesn't sale they have to re-market the property. Therefore most banks just choose to say no to "sale of home contingencies."
Remember, if you want to know if you can purchase a home without selling yours, talk with your lender. However, if you are thinking about that you may want to talk to a Realtor as well to determine what is the timeline and price point for you to sell your current home. That way you won't be stuck with two mortgages.
All of these points are important to consider as you save or inquire about "pre-foreclosures" for your home search. Hopefully this article will help you as you plan to purchase your next home.
Comments(4)