subject: Alternatives for Purchasing Foreclosures [print this page] Even more so than purchasing a standard home, getting title to a foreclosure can take even more creativity. I'll go through a few of the main ways in this article. Each of these methods is contingent on the stage that the respective property is in when you decide to purchase.
The first stage is the pre-foreclosure process occurs once the Notice of Default has been issued, and the house is about to go up for auction. At this point, the owner may have has usually come to the realization that the house is gone, and that they'll need to find someone else to assume ownership. If you are targeting properties in this stage, you'll want to have a realtor help you look for loans that are in default. Furthermore, you should create a short list of homes, hire a trained professional to inspect each of them, contact the owner, and do the math on whether or not you can actually turn a profit. Believe it or not, even homes in this stage can be incredibly difficult to profit from, if you don't do your due diligence.
Following this stage comes the actual property auction. At the auction, you will pay a deposit to hold the property that you win. The downpayment generally needs to be paid down over the course of a week... and sometimes less. Therefore, it's important to come prepared to the auction, with al of the necessary funds. In the week before the event, have a professional thoroughly inspect each house so that there are no surprises when you've won your bid. At this point, properties are generally sold as-is, so if it's broken when you purchase it, you're out of luck.
Finally, if the house does not sell at auction, it enters a state of being Real Estate Owned. REO's, as they are commonly known, can offer you substantial monetary advantages, since the lender is generally looking to convert the property to cash. After all, the lender is in the business of lending cash, not managing properties. Therefore, you can use this to your advantage when negotiating with the lender. A few things to look for are price discounts, as well as favorable lending terms. Also at this point, the title for the property is clear since the financial institution you are working with will have satisfied any liens or taxes that are on the house. Of course, homes in this stage are generally in very poor shape, so be careful, and hire a professional if doing this for the first time.
One great site to look for both foreclosure and REO homes is Foreclosure-Watch.com. This site offers you a free 7-day trial to search Foreclosures, Distressed Properties, and REO's.
