Foreclosures
More and more people in the United States are experiencing foreclosures. Here is some important information about foreclosures, what to do if your home is at risk of foreclosure and how to buy foreclosures.
At any given time, about 1 percent of residential property in the United States is facing foreclosure. Foreclosure rates rose in 47 states during 2004, and the rates in Colorado , Texas and Florida are over twice the national average. Foreclosures can create interesting investment opportunities. It is often possible to buy foreclosed property at 60 percent to 80 percent of market value, making foreclosed property a real bargain. Like all investments, however, real estate is risky, and without the right knowledge and guidance you can run an even greater risk of losing money.
What are foreclosures?
A foreclosure occurs when a homeowner defaults on his loan, meaning he can no longer pay his mortgage, and the lender chooses to collect by putting the property up for sale. There are different types of foreclosures, but one of the most common is a bank foreclosure which occurs when the owner borrowed money from a bank. If you default on loan payment, the bank or mortgage company can file legal motions to possess your home. Different states have different procedures but usually, within one year of defaulting, the lender will legally have possession of your home. In order to buy a foreclosed property, you must be at the auction in person, and you must pay the total amount of the property in cash.
What to do if you are facing a foreclosure:
Although facing foreclosure can be incredibly difficult and stressful, there are many options available to those facing foreclosure. Mortgage brokers and negotiators may try to contact you if there is enough equity in your home. If you have enough equity, you may be able to refinance your home to prevent foreclosure from taking place. In some situations, you may file for Chapter 13 bankruptcy in order to save your house. Also, you may sell your home before actual foreclosure takes place, allowing you to pay off the mortgage debt and possibly come out with some extra money. In any case, it is best to speak to financial, legal and real estate professionals who can give you valuable advice should you miss a mortgage payment.
Advantages and steps to buying a foreclosure:
Buying foreclosed real estate is different from buying property directly from the owner. After a lender comes in legal possession of a property, the property is then appraised and sold at auction. Foreclosure auctions may provide you with the possibility of buying a home more valuable than you could ordinarily afford. If you want to view a foreclosure, you must use an agent. Housing and Urban Development employees do not work directly with buyers.
If you want to place a bid on a home, your agent will present it for you with a deposit. If your bid is accepted, Housing and Urban Development will pay your agent up to 6 percent of the accepted price. It is both possible and recommended to have an inspection of any property you are considering buying. This way, you can see what repairs are needed, and you will have a better idea of an asking price.
Many foreclosed homes are undervalued at appraisal because of the large volume of homes government agencies have to process. Buying foreclosures can be a great investment opportunity, but if you are not experienced in or knowledgeable about the real estate industry, seek the help of an experienced real estate agent to help make your transaction a success.