Making money by purchasing foreclosed homes sounds like an easy way to turn a profit, but buyer beware: The unwary purchaser may be buying a financial disaster.
Residential real estate foreclosures have been on the rise nationwide for the past several years with little sign of slowing down in the near future. The adjustable rate mortgage phenomenon coupled with general economic factors of our time have created a perfect storm of disaster for many homeowners, and the result is that many homeowners are finding their homes in foreclosure. With these foreclosures comes an excellent opportunity for a knowledgeable investor.
For the ill-informed, however, buying a foreclosed property at a sheriff’s sale can be confusing at best, and at worst it can be financially disastrous.
Become Familiar With The Foreclosure Process In Your State
The foreclosure process in each state is dictated by statute and case law, and the procedure differs greatly from state to state. In some states, such as Texas, the entire process can take less than three months. In other states, such as Wisconsin, the process can easily take nine months to a full year, or even longer if the homeowners file for bankruptcy protection or otherwise work to delay the process.
Each state has its own methods and procedures, and the first step to success is understanding the foreclosure process for your state in its entirety. If you plan on making foreclosure investment a serious venture, you may even wish to enlist the assistance of an attorney who can advise you on the foreclosure process and help you better understand the full procedure for your state.
Do A Thorough Title Search
In many states, properties are sold at foreclosure sales subject to any liens and encumbrances already on the property. This can include judgment liens, tax liens, prior mortgages, real estate taxes or any number of other financial or title issues which the purchaser at the foreclosure sale can inherit. An unwary purchaser may buy a property that seems like a great bargain only to find out that it was sold subject to tens of thousands of dollars worth of other liens, or worse.
Do not rely on the statements of other potential purchasers, the attorneys for the foreclosing bank, or even those of the homeowner when it comes to the status of the title to the property. Either enlist the assistance of a title company or become familiar with searching the judgment rolls, tax records and real estate records. It is absolutely essential to exercise due diligence and research the status of title for each property before even considering placing a bid at a foreclosure sale.
Be Skeptical About The Property’s Condition
Unlike a traditional real property transaction, there is rarely an opportunity to view the interior of the foreclosure property prior to purchase. Further, the properties are purchased as-is with absolutely no warranties as to their condition. Some interested buyers do contact the homeowners and ask to view the interior of the property, but not all owners are willing to show their houses and in many cases the property has been abandoned or the owners are difficult to locate. As your only evaluation of the property’s condition is likely to be from the exterior, it is essential to think critically about the interior’s condition.
When residential properties go into foreclosure it almost always related to the owner’s financial difficulties. This means that there may be maintenance issues with the property that were ignored due to their expense, or serious repairs that should have been done but were neglected due to the cost. As a purchaser of a foreclosure property, you must be willing to take on whatever problems the interior or structure of the property may have.
There Will Always Be More Properties
Foreclosures are showing no sign of slowing down. If you have serious reservations or unanswered about a property it may simply be best to hold off and wait for the next one. If you cannot go into a foreclosure sale armed with complete knowledge of the property you want to bid on – knowledge of the status of title, the interior and exterior condition, and any other issues that might be of concern to you – you may be better off waiting for the another property.
Residential real estate foreclosures have been on the rise nationwide for the past several years with little sign of slowing down in the near future. The adjustable rate mortgage phenomenon coupled with general economic factors of our time have created a perfect storm of disaster for many homeowners, and the result is that many homeowners are finding their homes in foreclosure. With these foreclosures comes an excellent opportunity for a knowledgeable investor.
For the ill-informed, however, buying a foreclosed property at a sheriff’s sale can be confusing at best, and at worst it can be financially disastrous.
Become Familiar With The Foreclosure Process In Your State
The foreclosure process in each state is dictated by statute and case law, and the procedure differs greatly from state to state. In some states, such as Texas, the entire process can take less than three months. In other states, such as Wisconsin, the process can easily take nine months to a full year, or even longer if the homeowners file for bankruptcy protection or otherwise work to delay the process.
Each state has its own methods and procedures, and the first step to success is understanding the foreclosure process for your state in its entirety. If you plan on making foreclosure investment a serious venture, you may even wish to enlist the assistance of an attorney who can advise you on the foreclosure process and help you better understand the full procedure for your state.
Do A Thorough Title Search
In many states, properties are sold at foreclosure sales subject to any liens and encumbrances already on the property. This can include judgment liens, tax liens, prior mortgages, real estate taxes or any number of other financial or title issues which the purchaser at the foreclosure sale can inherit. An unwary purchaser may buy a property that seems like a great bargain only to find out that it was sold subject to tens of thousands of dollars worth of other liens, or worse.
Do not rely on the statements of other potential purchasers, the attorneys for the foreclosing bank, or even those of the homeowner when it comes to the status of the title to the property. Either enlist the assistance of a title company or become familiar with searching the judgment rolls, tax records and real estate records. It is absolutely essential to exercise due diligence and research the status of title for each property before even considering placing a bid at a foreclosure sale.
Be Skeptical About The Property’s Condition
Unlike a traditional real property transaction, there is rarely an opportunity to view the interior of the foreclosure property prior to purchase. Further, the properties are purchased as-is with absolutely no warranties as to their condition. Some interested buyers do contact the homeowners and ask to view the interior of the property, but not all owners are willing to show their houses and in many cases the property has been abandoned or the owners are difficult to locate. As your only evaluation of the property’s condition is likely to be from the exterior, it is essential to think critically about the interior’s condition.
When residential properties go into foreclosure it almost always related to the owner’s financial difficulties. This means that there may be maintenance issues with the property that were ignored due to their expense, or serious repairs that should have been done but were neglected due to the cost. As a purchaser of a foreclosure property, you must be willing to take on whatever problems the interior or structure of the property may have.
There Will Always Be More Properties
Foreclosures are showing no sign of slowing down. If you have serious reservations or unanswered about a property it may simply be best to hold off and wait for the next one. If you cannot go into a foreclosure sale armed with complete knowledge of the property you want to bid on – knowledge of the status of title, the interior and exterior condition, and any other issues that might be of concern to you – you may be better off waiting for the another property.