Foreclosure refers to the legal process by which a homeowner loses rights to a property by failing to pay off its mortgage. As such, the property becomes “foreclosed,” or repossessed, by its lender. These lenders are often banks, mortgage companies, and other lending agencies and financial institutions.
Foreclosed properties pose as a cheaper alternative to investors and homebuyers. Since they’re technically secondhand properties, they come at a discounted cost, often below the standard market value.
Investors often venture into foreclosures to profit from “flipping” the space, which involves refurbishing the property into a more appealing asset that they can sell at a much greater price than its original cost. Homebuyers looking to save or those without the finances for brand-new homes look to foreclosures for a home they can afford.
Banks are the main source of foreclosures. Banks and insurance companies have a wealth of foreclosed properties up for auction or sale. It’s all a matter of looking at newspaper listings or the banks’ official websites to spot a scheduled auction or a foreclosure that suits your needs. Websites that serve as a comprehensive and trusted database or search engine for real estate listings are also easily accessible for the end-user.
There are three avenues by which you can purchase foreclosures. You can buy the property on a “short sale” in the pre-foreclosure phase, for instance. In a short sale, the property is sold at a cost lower than the outstanding mortgage.
Alternatively, you can also bid at a foreclosure auction. Take note, however, that auctions typically don’t grant you the chance to inspect the property as you see fit. Auctions will also require you to pay in cash.
Lastly, you can choose among the unsold foreclosures post-auction. Called Real Estate Owned properties or REOs, these foreclosures have had the rights of ownership reverted to the bank or lending agency. Simply refer to or approach the banks of your preference for a list of the foreclosures they’re selling.
Take in mind that, as with any investment or purchase as significant as real estate, research, expert advice and good sense are key in harnessing its potential and reaping the its benefits and profits.