FORECLOSURES are not going away. It is estimated that 20-45% of real estate sales in 2009 will be a short sale or a foreclosure. Customers are asking me every day about foreclosures in this market area. Below is a brief overview of the foreclosure process that can give your customers a little better understanding of how these work.
FORECLOSURE is a process that allows a lender to recover the amount owed on a defaulted loan by selling or taking ownership (repossession) of the property securing the loan. The foreclosure process begins when a borrower/owner defaults on loan payments and the lender files a PUBLIC DEFAULT notice or a lis pendens (Latin for "lawsuit pending") - depending on the state.
FORECLOSURE buyers, however, need to be careful. There can be other liens on the property, which can drive up the purchase price. Liens are typically placed on a home for outstanding property taxes. But there can also be mechanic liens for unpaid repairs or remodeling done by a contractor.
Ultimately, however, the foreclosure process can end one of four ways:
1. The borrower/owner pays off the default amount to reinstate the loan during a grace period known as pre-foreclosure.
2. The borrower/owner sells the property to a third party during pre-foreclosure, allowing the borrower/owner to pay off the loan and avoid having a foreclosure on his or her credit history.
3. A third party buys the property at a public auction at the end of the pre-foreclosure period.
4. The lender takes ownership of the property, usually with the intent to re-sell. The lender can take ownership through an agreement with the borrower/owner during pre-foreclosure or by buying back the property at the public auction.
I received a call from a buyer yesterday looking for a "foreclosure" 3 bedroom/2bath home with a large lot or acreage, private setting within 5 miles of town for under $100,000. It is shocking how many of these inquiries I have fielded. The quick and simple answer is, "This is not within the realm of reality."
FORECLOSURES are not, by definition, screaming deals for the buyer. They certainly can be, but a good agent is required to wade through the potential pitfalls of a foreclosure property.
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