Buying Directly From The Lender
Armed with the necessary cash or mortgage loan approval, you can then make an offer to the lender. If you know or get to know someone of position at the local bank, you may be able to approach that executive about available REO (Real Estate Owned) properties, the term most banks use for properties that have been fully foreclosed. Smaller banks and lenders are sometimes willing to sell REO properties directly to qualified buyers, when possible. This allows them to save real estate commission and other marketing expenses. As you negotiate with the lender, remember the benefits you bring to the table. The most important benefit is time. Each month delay is additional expenses for the lender in the form of unpaid interest, property taxes, late charges, attorney fees, legal costs and administrative expenses. Just by avoiding the final foreclosure and sale, lenders can save up to $10,000.
Auctions & Sheriff Sale
However, the most common way to purchasing REO properties is to attend the foreclosure auction or sheriff's sale and make bids on available properties.
If the auction bids do not satisfy the lender's minimum requirements the property is not sold. Instead, the property is retained by the lender, which then tries to sell it through a real estate broker. You can then make offers through the real estate broker. In some cases, the lender may skip the auction altogether.
As you will soon find out, you will not be the only person with the notion of finding a bargain on the foreclosure market. Before you begin bidding, you should already have established what the property is probably worth and how much you are willing to pay for it. To establish its market value, you will need to consult a good, but inexpensive appraiser or a real estate agent with experience in the area.
When purchasing foreclosure properties, the wise investor should NEVER pay market price. If you are willing to pay market value, you might as well buy a house through an agent, who will obtain helpful disclosures and warranties for you. When you buy a foreclosure property, you buy it as is—any hidden problems are normally your problems, not the seller.
More aggressive investors will often contact the owner of foreclosure properties to try to buy the property before the auction. This is sometimes very intrusive and many homeowners (already traumatized by the whole foreclosure experience) are very annoyed and angered by what they perceive as vulture-like tactics.
But in fact, many homeowners are looking to sell their foreclosure property. By avoiding the actual foreclosure, their credit report is slightly more improved. Although the lender may have lots of past due interest, late charges and attorney fees stacked on the price, there's no law saying that you cannot negotiate that away.
Many mortgage lenders will drastically reduce any penalties and fees, in order to facilitate such a "distress" sale. Remember that the lender wants to unload non-performing loans because it looks awful during their annual audit.
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This book makes it easy to not only buy a home, but figure out everything that you need to do, even get a loan. In simple and easy to understand language, it talks about where you should buy a home, what to look for in a home, how to find a home, how to get an agent, how to get a mortgage and more. This is a step by step process that you, a new home buyer, can use to purchase a home.