Foreclosure Homes – The Why and the How to (Buy)

If you are a looking to buy a foreclosure home, this is considered by many, as a good time to do so. With the number of foreclosure homes on the market a watchful step must be taken though.

According to a recently published report close to 40% of homes sold in California in the second quarter of 2008 were involved in foreclosure. A year earlier this figure stood at 5.4%.

Daniel Mudd, CEO of Fannie Mae said that they are not considering this a good time to hold on to REOs and in order to get foreclosed properties off their books they are pushing hard for sales.

The author of ‘Prospering in the Rising Wave of Foreclosures’, Steve Dexter, who has invested in foreclosed properties by the dozen, thinks now is a good time to buy foreclosed homes.

One can buy a home at different phases of the foreclosure process. A home can be bough at the pre-foreclosure stage, at the Sheriff’s sale, or once the property has been foreclosed upon (post foreclosure).

When a homeowner is delinquent on his mortgage payment, the home enters the pre-foreclosure stage. When a payment is missed, the lender files a delinquency notice with the county courthouse; making this a good place for a buyer to look for lists of pre-foreclosure homes. A fair amount of instances have come to the fore, where pre-foreclosure homes have gone in for short-sales. Short-sales are where the property sells for lesser than what the homeowner owes on the mortgage. The lender plays a part, where the remainder of the loan amount is forgiven.

Buying a foreclosed property has a person dealing with the bank. This is considered as a safer option by many because not only is the home empty, it also comes with a clear title. Bank owned properties are known to sell for 10-15% lesser than their market values.

Buying at Sheriff’s sales can be risky as the homes in question are not open to inspection. The possibility of existent second liens exists. These homes are best left to the experienced home buyer.