What Is Involved In The Foreclosure Process?
Foreclosure is the process of a mortgage company taking possession of a property because of a failure of the mortgagor to maintain positive payments. It's a sad truth that, though most home owner's wish to avoid foreclosure, foreclosures still happen. Despite a home owner's best efforts they can still end up having to foreclose on a home, potentially losing all their equity and damaging their credit while having to find a new place to live.
For investors, the property can usually be bought at a better price than if processed through a traditional sale. During the foreclosure process, time and certainty of a sale are much more important since the seller is looking to recoup as much from their unmanageable property as possible. As difficult as it can be for the seller, it can prove to be a mutually beneficial sale if an investor comes along during the right stage of the foreclosure.
There are three stages of foreclosure: pre-foreclosure, foreclosure, and post foreclosure.
Pre-Foreclosure
The pre-foreclosure phase is when an investor is able to do the most good for a distressed home-owner. In this stage, if an investor is able to quickly reach a price that is agreeable, then the house can be sold with most of the distressed home-owner's credit rating intact. Ideally if an investor is buying a home during this phase they needn't involve the lender, just interact directly with the home owner. An investor's best chance to find property in this stage is through real estate agents, accountants, attorneys or through basic word of mouth such as colleagues and friends who may know the homeowner.
Foreclosure
The next option is the actual foreclosure phase. This is when it's most advantageous for investors to strike, but often too late to help out the distressed home owners. The best way to find foreclosure property is through the County Clerk's office. At the Clerk's office an investor can look up when notices of default are filed and be aware of any pending foreclosure sales. If an investor wanted to get the leg up on others waiting for a sale they could request that they be placed on a notice list for any pending defaults.
Depending on the state the foreclosure process is different. A judicial foreclosure can take much longer then a non-judicial foreclosure which is usually ready to go to auction after two to four months. No matter how they get there once they are finished processing they will be sold at the auction to whoever is the highest bidder.
Post Foreclosure
You can attempt to buy a house when it is in the post-foreclosure process. You will be able to look up the new owner and how much they paid for the foreclosure notice. This is when the property has either been sold to an investor at auction or it is being held by the lender, which is known as a REO (Real Estate Owned). An investor will usually be a tougher buy when they bought during the foreclosure part of the process but they might still be willing to sell so they can have a quick property sale. If the house is lender owned you are usually able to negotiate more because they would just rather recoup their losses and get the house off of their balance sheets.
I hope now that you know the different distinctions that you will be able to better understand the steps to selling a house through the foreclosure process. It can be hard to navigate at first but if you can handle it right it offers you an unique opportunity to make a profit and also maybe help out a distressed home owner.
About the Author
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