Have you ever thought about buying a foreclosed property or wondered if it was a way to get a great deal on a property for less money? Well, sometimes that statement is only half true. Buying a foreclosed or bank-owned property can be tricky even for a seasoned investor and might not be the right move for everyone, but if you are willing to take the risk, you can get a great deal.
First, let’s talk about what a foreclosed or bank-owned property is. This is a property that is owned by a bank and not an individual. This process happens when someone purchases a property but got behind on their mortgage payments with their lender. If the borrower is unable to get caught up, their lender then becomes like a “repo man” and takes the property back through what is called the foreclosure process. This process can take time, so if the owner is able to get help or make up those payments, they can stop the process, but if they can’t, the bank will then take possession of the property.
Before you start the process of looking for a “great” deal, the first thing you want to do is make sure that you are working with an experienced real estate agent because there is a great amount of red tape and hoops to jump through on these properties. The right agent will be able to explain the process and make sure you follow all the guidelines so you don’t miss out on the property you want. Having an agent who understands the process is the key to getting these properties, as they must understand how each company works and how they require offers to be submitted. If you or your agent makes even one small mistake, you may lose out.
Several large companies handle most foreclosures; some common names are Freddie Mac, FannieMae, Secretary of Veterans Administration and HUD. On occasion, you may also see some listed under the name of the bank that held the original mortgage. Because each of these companies varies in required paperwork and guidelines, it is beneficial to become familiar with the different companies and their websites prior to starting your search.
This is why having a well-versed agent is important not only for navigating the various companies but also for explaining how financing and inspections compare to that of a regular property purchase.
With all of that being said, you can get a great deal if you follow the steps and are careful in your search so you don’t get in over your head. Just make sure to have all your ducks in a row and find a great agent, and you might be able to find that diamond in the rough and make the deal of a lifetime if you follow a few simple steps.