INVESTOR RELATIONS: HOME BUYING OPTIONS
Understanding Foreclosure Process
The foreclosure process doesn't just happen overnight. A typical foreclosure timeline can extend over several months. Each stage of the foreclosure process offers different types of opportunities for the buyer. The stages of the Foreclosure process are (1) Pre-Foreclosure (2) Foreclosure Sale/Auction (3) REO or Real Estate Owned by the bank and (4) HUD Properties.
Pre-foreclosure Homes
Pre-foreclosure represents the first stage in the foreclosure process. In this phase, the homeowner has missed at least one payment and is now considered delinquent on the loan. Buying a property in pre-foreclosure involves approaching the owner in default with an opportunity for the owner to escape the burdens of foreclosure. Your goal is to help the homeowner navigate through this challenging situation, relieve them of the growing mortgage debt and ultimately to avoid foreclosure. For you the buyer, pre-foreclosures offer potential discounts of 20% to 40% below market value, while helping out someone in distress (the owner).
Foreclosure Sales or Auctions
The auction is the stage of the foreclosure process after the pre-foreclosure phase of the property has ended. You attend an auction (typically at the steps of the county courthouse) and bid on the home, just like any other auction. During an auction, the lender is now seeking to recapture its losses by auctioning the property in a public sale to the highest bidder. At an auction sale, buyers are typically required to pay in cash and have little time to research the property beforehand. However, an auction sale can offer some of the best bargains, often times as much as 35% to 55% below market value.
REO Properties
REO stands for Real Estate Owned (by the bank). REO properties are another great opportunity to purchase foreclosures. The REO stage is the process after the auction, when the lender is either the successful bidder or there are no bids at all. In either case, the bank becomes the legal property owner and the property is considered a "non-performing asset" of the bank, which is a fancy way of saying the bank doesn't want to hold on to the property. This means a solid buying opportunity for you, the homebuyer. While buying property from the bank is the easiest way to purchase a foreclosure, the savings opportunities are typically less than buying a pre-foreclosure or auction property.
HUD Homes
HUD is a shorthand term for the US Government's Department of Housing and Urban Development. HUD's mission is to increase homeownership, support community development and increase access to affordable housing free from discrimination. When someone with a HUD insured mortgage couldn't meet the payments, the lender forecloses on the home; HUD pays the lender what is owed; and HUD takes ownership of the home. Then they sell it as quickly as possible, often at significant savings because most HUD Homes are affordable for low- and moderate-income Americans. HUD Homes are sold "as-is," without warranty. That means that HUD will not pay to correct any problems. But even if a HUD Home needs fixing up (and not all of them do), it can be a real bargain! For example, HUD's asking price on the home will reflect the fact that the buyer will have to invest money to make improvements. HUD might offer special incentives such as an allowance to upgrade the property, a moving expense allowance, or a bonus for closing the sale early. And keep in mind that on most sales, the buyer can request HUD to pay all or a portion of the financing and closing costs. Your real estate agent will have details. We encourage you to get the home professionally inspected before you make an offer so you will know what repairs you may have to make BEFORE you submit your bid.
To purchase bank owned properties
and short sales send us a note.
We update our list of Foreclosure, REO, Short Sale
and HUD Homes for sale weekly.
