Bank foreclosures are making up more and more of the real estate market today. Knowing the real deal about foreclosures and how they work can give you the confidence you need to seize today’s foreclosure opportunities.
It has been reported by many financial experts that the current housing market holds more profits for savvy homebuyers then anytime within our lifetime. They also are advising to jump in with both feet while you can.
1) All Pre-Foreclosures are Sold at Sheriff Sale
Homeowners who become delinquent on their mortgage payments receive a “Notice of Mortgage Foreclosure”. This notice states that the lender intends to foreclose on the property through sheriff sale auction. Not all of these properties will be sold on the sheriff sale and the homeowners have many options to stop the foreclosure before it actually gets to the sheriff sale auction.
2) Owner’s are Desperate when they get a “Notice of Mortgage Foreclosure”
Homeowners have more options today to fight a foreclosure than ever in the past. Loan Modifications, Bankruptcy and Short Sales are holding off foreclosures longer and giving Homeowners multiple ways to work out the issues with their lenders.
3) Buying Direct from the Owner in Foreclosure is the Best Way to Buy
“Buyer Beware” definitely applies when negotiating with an owner in foreclosure. By the time the bank files for foreclosure, the owner can be delinquent several months. There can be multiple mortgages, liens, taxes, judgments and other debts that the owner “forgets” about. Do NOT give any owner money directly and make sure how much they really owe first.
4) Buy direct from the Sheriff Sale and Get a Bargain
The experienced buyers at Sheriff Sales have done their homework first. The amount you pay at the Sheriff Sale might not include all of the debts you would be required to pay to own it. There could be delinquent taxes, municipal liens or other mortgages against the property that would need to be paid in order for you to have clear title to the property. Paying for a property search to make sure you are totally informed of any debts you may be responsible to pay is vital.
5) The Sheriff’s Department Evicts the Occupants before the Sheriff Sale
If you buy a property from the Sheriff Sale and people are still living there; like prior owners, renters or squatters, it now becomes your problem to evict them. It’s now your property and your problem to get them out of your house. You would be required to go through the formal eviction process to have the occupants removed from the property.
6) The Sheriff’s Department will wait for You to Get a Mortgage
When you have the winning bid at the Sheriff Sale on a property, you immediately are required to deposit 10% in cash, money order or certified check payable to “Sheriff of Montgomery County.” The full balance must be paid within 10 calendar days to the sheriff also in certified funds. You will forfeit your 10% deposit if you fail to pay the full balance within the required timeframe.
7) Banks Sell Foreclosures for the Balance Owed by the Prior Owner
Once the Sheriff Sale is held, if there is no offer at or above the minimum amount, the property reverts back to the Bank who filed the foreclosure suit. It now becomes a bank owned property, commonly referred to as an REO (Real Estate Owned). Once the bank owns the property, it is their decision to determine the selling price. The bank can ask more or less than the amount owed by the prior owner.
8) The New Buyer Pays Taxes & Municipal Liens on a Bank Owned Foreclosure after the Sheriff Sale
After the Sheriff Sale and the bank owns the property, all of the debts of the prior owner become the responsibility of the bank as the new owner. To resell the property, the bank must payoff all debts incurred by the prior owner and any current taxes or liens against the property until they resell the property.
9) You can’t get Title Insurance on a Bank Foreclosed Property after the Sheriff Sale
The bank is responsible to sell the property with Free and Clear title. The title company will search and include all bills due by the bank to be paid at settlement. The title company will obtain certification from the taxing and municipal authorities prior to settlement to verify the bills owed. They will issue an Insured Title to guarantee you are not responsible for any prior debts owed on the property.
10) Buying a Bank Foreclosed Property is Always the Best Deal
After the sheriff sale and the bank officially owns the property, they have appraisers value it for their records. The bank usually will try to compete with other properties on the market and gauge interest for a sale. If the bank does not receive acceptable offers, they re-evaluate the price and drop slightly over and over again for a few months. Banks usually will not consider an offer more than 10% less than their current asking price. After the property has been on the market several months, the bank sometimes will accept a really low offer to unload it. Other properties on the market in competition with foreclosures; like estate sales, divorces, job transfers and motivated sellers sometimes are more flexible on price then bank foreclosure homes on the market.
Hope this helps.
Kathleen McKinney, Realtor - REO Specialist - Platinum First Realty, 708 Main Street, Harleysville, PA 19438
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