Foreclosures in the United States have risen by a sizable 132% in the last year. The post-pandemic world has placed financial strain on many homeowners who must sell their homes or have them seized. So what happens to a property when this occurs?
For investors, this process results in a way to get a property for a reduced price. Read on as we give our essential guide on how to buy a foreclosed house.
What Is a Foreclosed House?
A foreclosed house is one seized by the lender. This occurs when the borrower has stopped paying back the money they owe on a mortgage. When you see a foreclosed property, the ownership has reverted to the lender who is selling it to make back its costs.
Types of Foreclosure
There are different types of foreclosure depending on where the process is at. Some may be owned by the lender, while some may still be in the hands of the borrower and held by a bank.
Pre Foreclosure
This happens when notification has been served to the borrower about their missed payments. The home gets placed for sale so that the person can use the funds to make any payments, avoiding a bad credit score.
Short Sales
Short sales are when the lender accepts an offer that is less than the amount owed. This usually happens when the borrower is going to come into financial hardship, such as unemployment. A seller does not need to be in arrears to do this and most sales operate as a standard sale would.
Sheriff’s Sale
When you buy a foreclosed house at a sheriff’s sale it is always conducted by local law enforcement, and often auctioned at the courthouse. They take place after a grace period has been given for the borrower to catch up on their payments.
Bank and Government Owned
This occurs when homes do not sell at auction and revert back to the lender. That may be a bank or a broker if it was a government-backed loan.
How to Buy a Foreclosed House
The biggest draw to a foreclosed house purchase is the price. They are much cheaper than other properties in the area and often, incentives are added to lower the cost even further. This awesome guide has some great tips for beginners to get bargain properties at foreclosure.
Lower prices occur because the person selling only has a certain window to get rid of the house. Sellers need to get what they can for the home to make any outstanding payments.
When the property has already been seized, by a sheriff’s office or bank, neither institution wants a property on its hands. For them, it is better to sell and make a little profit than have to manage the building. The result of this is another opportunity to get a bargain.
Making a Foreclosed House Purchase
Now you know how to buy a foreclosed house, make sure you take your time to find the right one. Don’t just pick a property because of its low cost. Instead, work on finding something right for your needs and portfolio.
This article is one of many on our site about investments. From property to finance, we can help your money grow in the coming years.
