Overview
Researching foreclosure is becoming more and more important as interest heats up. Typically, foreclosed homes sell for about 5% below market value. The key is to buy directly from a homeowner in mortgage default. lender may be willing to waive some closing costs, maybe even offer a break on the interest rate or the down payment.
Investment Time
Houses can be expensive assets, so it's a good idea to do your homework
before you purchase. Good buys are available, but they require research,
preparation, patience and persistence.
The foreclosure process starts when a property owner defaults on mortgage
payments. Many owners of homes that go into foreclosure have been struggling
financially for almost a year before they give up, which usually means that
the house has not received needed repairs or general maintenance for a
while.
Quite often, people anticipating foreclosure will treat their homes poorly.
Be sure to anticipate added expenses to fix up a foreclosed house.
When a lender decides to foreclose on a property, a notice of default or a
lis pendens (Latin for "lawsuit pending") is filed, depending on the state.
This document is a public record, and for buyers, it's the first step in
locating a property in foreclosure. A buyer looking for foreclosures also
can buy magazines and newsletters that list properties in default.
Once a home has been located, search public records. Look for liens on the
property, since they can drive up the purchase price. Liens typically are
placed on a house for unpaid property taxes. Also check assessed values and
sale prices of neighboring properties.