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Last Updated: May 14th, 2012 - 22:24:01 |
Creative Home Buying
The risk in buying a cheap home is that it may be even cheaper by the time you decide to
sell. This is known, in sophisticated real estate jargon, as a lousy deal. However, by
observing certain precautions, you can minimize the inherent risk in buying an inexpensive
home. We shall examine five sources of cheap homes: condominiums, foreclosures, fixer-
uppers, new homes, and pre-market homes.
Today we will talk about Foreclosures.
Foreclosed Homes
In addition to Condominiums, foreclosed homes sometimes provide an opportunity to purchase an inexpensive house. Recall that all lenders hold the property as collateral via a deed of trust or mortgage. In the event a borrower fails to make the mortgage payments, the lender can repossess the property. In states that use trust deeds, there are three time periods during which distressed property may become available for purchase.
The first time is after the Notice of Default has been filed against the borrower. Following the Notice of Default, the borrower has a grace period of a few months to reinstate the mortgage. To do this, the borrower must make up any missed loan payments and pay any trustee fees and expenses. During the period, the borrower may very well wish to sell the property, often at a discount.
To find borrowers in this unfortunate quandary, contact the county clerk who records notices of mortgage default. In urban areas, a local public recording summary service may provide this information. The county clerk or a title insurance firm can tell you if such a service exists in your area.
The second opportunity to purchase foreclosed property is at the foreclosure sale. These sales require the buyer to put up full cash payment, and therefore are of little interest to most home buyers.
The final opportunity to purchase foreclosed property is after the foreclosure sale. If there are no bidders at the foreclosure sale, the lender takes title to the property.
The repossessed property that the lender holds is called REO (real estate owned). Most lenders are eager to get rid of these properties, and sell them at very favorable terms. Contact each lender's REO officer. Ask if the lender presently holds any REOs, and request that they notify you a new properties become available. Also request the name and phone number of the realty firm that handles the lender's REO portfolio.
The U.S. Housing and Urban Development Department publishes its repossessed homes weekly in the classified section of newspapers. The newspaper announcement also explains how to bid on these houses. At the beginning of the month, call the VA for a list of its repossessed homes.
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