Overview
Finding
Bargains in Foreclosures
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.