After steady increase in home prices for years, started to come down with financial crisis across the world and rise in foreclosures. This is the right time to become a homeowner as the prices are declining due to millions of homeowners are facing foreclosures. That means buying a foreclosed home could potentially save you more money by buying a home that is taken over by bank from homeowner in an attempt to recover the money owed by the property owner.
There are three ways to buy foreclosed homes:
At auction, where would-be homeowner have to place a bid along with other buyers. In this scenario one has to face competition with others. The actual process may vary from state to state according to law. Auctions will be carried by the court at court or in front of the foreclosed home.
Buying at auction carries high amount of risk and reward because buyer wonâ€™t have time to inspect the property before you buy, have to pay in cash and it is the responsibility of the buyer to evict the old home owner when he refuses to move out of it.
At the same time it offers greatest reward as you can manage to purchase at the much lower price prevailing at market. It is the best option when you are looking to flip the property and make a quick profit.
From REO, real estate owned properties is another way through which you can buy foreclosed home. It is less risky and least rewarding way compared to other options because you can inspect the property in advance, research clear title and most important you can get mortgage. REOâ€™s come into picture because most banks prefer to sell the foreclosure property through a broker.
Pre-foreclosures is the third option through which you can buy foreclosure home. In this option you will purchase the property from the homeowner before the bank takeover the property. This is also the best option to buy as you have time to inspect the property before you buy and demand the clear title from the homeowner. In this case when you buy the property, you owe the mortgage associated with the property and have to make the mortgage current to bank.
Before you enter into deal here are few things that one must look at from a bank:
Most often bank deals with brokers to sell the foreclosure property. They are called real estate owned agents. Finding a good REO is a best way to get best deal. They have much foreclosure listing in different areas that gives you choices and help to get best deal.
One must understand that not every deal is best deal. Banks are there to make profits from their lending. If the home is in great shape and in good area then it obviously want to make much money out of it, so be aware of it.
Plan your finance before you look to purchase a foreclosed property. As you are dealing with banks you have to show your proof of income to bank before you enter into agreement.