An In-Depth Analysis
A lot of people have no idea about the existence of foreclosures. Many new prospective home-buyers even play around with the idea of buying homes which have been foreclosed. They’re cheap. But the common misconception is that banks dump these cheap homes on unsuspecting people, but this isn’t true at all.
Foreclosure is a home that is the bank’s property, which once belonged to an individual. It becomes the bank’s property either because it has been abandoned, or the homeowner has voluntarily deeded the house to the bank. This, however, is not the case of the bank taking control of the home. The bank cannot take back something that it had not owned in the first place. This is where the bank forecloses the mortgage, or the trust and then seizes the home.
This is the difference that many people fail to understand. No worries. We’re here to help you out. Read on to get enlightened with an in-depth rendering of the concept of foreclosures!
The Reason why Many People go for Foreclosures
There are a lot of reasons as to why people opt for the bank to foreclose their home. They simply stop making payments and a lot of factors influence this decision. The main reason contributing to this is the fact that they have recently been laid off or have voluntarily quit their jobs. As a result of this they would definitely not be able to pay their dues for the home, and will have to definitely foreclose their home. When the market crash happened in 2005 and lasted all the way until 2011, many people chose to simply walk away from their homes instead of sticking on with it primarily due to the fact that their home’s value had reduced considerably. As a result of this, they figured that the cost of payments is more than what their homes were worth. In that situation alone, it proved to be a good decision, but foreclosing a home is not always the best decision.
Buying a Foreclosure Directly from the Seller
There exist a lot of investors who decide to buy a home that is about to be foreclosed. This may prove to be very advantageous for those who consider doing this owing largely to the fact that the value of homes would be considerably low, and it would be a valuable investment for these people. This happens to such a great extent that there are people who specialize in buying foreclosures! What has to be determined is the fact that you have to decide if you are the kind of person who can effectively make use of this opportunity. It’s pure business, but when you look at it from a lot of point of views, you have to understand that doing this is ultimately going to be putting people out on the streets, and you’re not “helping” them.
Buying a Foreclosure On a Sale
There are certain rules and regulations that you have to follow when you choose to go for this. A lot of the times, you will not be allowed to inspect the home before you buy it. These managers tend to follow up with the “What You See is What You Get” kind of route. One of the major problems associated with this is the fact that if you are looking to purchase these foreclosed homes, you will not be able to estimate how much it would cost you to renovate the home. You will not be able to witness the damage levels to the home either and hence you will not be able to effectively estimate the amount of spending from your end and hence you will not be able to allocate funds for the same. Another drawback could be de-factos recorded against the property that will most likely become your problem after the title transfer. Some investors who buy at these sales pay for a title search in advance to avoid this problem. These guys who show up to bid on the courthouse steps are professionals, and they buy foreclosures at the time of auction as a business. In addition, you do not need to hire a real estate agent to buy a foreclosure at the auction.
Buying a Foreclosure Directly From the Bank
A lot of banks do not opt to sell homes directly to investors or home buyers. If a bank is willing to sell these foreclosed houses independently and not in bulk sales, the bank tends to usually list the home through a real estate agent. There are specific agents who specialize in foreclosure house listings. Also, it is a lot more common happening to buy a foreclosure directly from the bank in a bulk sale purchase. In bulk sales, the banks will package a bunch of properties into one transaction and sell them all at once to one entity. This is one of the best ways to buy a foreclosed home because there will be a high amount of discount associated with the transaction.