It’s easy to find local foreclosure homes. While foreclosure is hardly a pretty story for the home’s previous owners, it can be a bargain for future buyers. Since banks are often eager to unload these foreclosure properties, they aim to break even with an asking price. That’s typically the sum of the remaining mortgage note plus interest, lawyer fees, and penalties. On average, this can end up totaling about 15% to 20% below the homes actual value —and if you want to buy a foreclosure, you’ll find it often sells for less than asking price.
Similar Types of Property
- REO (Real Estate Owned)
But buying a foreclosed home does come with risks, so buyers should proceed with caution to see if the gamble is worth it.
How does foreclosure work?
Foreclosure isn’t something any homeowner wants to go through. Unfortunately it affects hundreds of thousands of Americans every year. So how does the foreclosure process work?
Homeowners default on their mortgage by failing to pay their required monthly payments. And it’s rare for lenders to begin foreclosure after just one late mortgage payment. Lenders usually offer alternatives during this period, including different payment plans. This is done to help the homeowners get back on track, keep their home, and keep paying their monthly mortgage bill.
If a borrower can’t come up with the funds to pay what he or she owes, a lender will issue a notice of default. This form is sent to the mortgagee via a certified letter. It typically gives a homeowner 90 days to pay off the most recent bill. This is the beginning of the formal process.
If the homeowner hasn’t come up with the money within 90 days of the notice of default, the lender may proceed with the foreclosure. Next comes a notice of sale, which states that the trustee (the lender) will sell the home at auction within 21 days.
The home will be sold at a public auction to the highest bidder. The buyer will have to pay the full amount of the bid immediately. This buyer will receive a trustee’s deed once the sale is complete, at which point he becomes the official owner.