Buying Foreclosures - Bank Foreclosed Properties

Secrets to Buying a Home After Foreclosure

Buying foreclosures is a hot topic and investors/home buyers spend a lot of time looking for foreclosure leads. But what is the secret of buying a home after foreclosure? Is buying a bank foreclosure risky or a chance in a lifetime?

First, as an investor, you should have some idea of the mortgage foreclosure process . There are more than a dozen variations of foreclosure law, each State has it's own laws. Basically there are two types of foreclosure:

• Judicial foreclosure


• Power of Sale foreclosure

Before a note holder starts the foreclosure process, the homeowner typically has not paid the mortgage for three months. With the current crisis, that timeline may even be extending as banks and politicians try to keep homeowners from going into foreclosure.

In a Judicial Foreclosure State the bank typically files a "lis pendens" (which means law suit) in the local Courthouse. The defendant in the law suit has some time to respond to the law suit (often two to three months). Through legal actions the defendant can off fend off foreclosure for a long time (I worked with one homeowner that had kept the banks at bay for two years while he lived in the house rent free).

In a Power of Sale foreclosure State the note holder will file a "Substitution of Trustee Notice" and publish a notice in a local paper. These types of foreclosures can happen rather quickly - sometimes in 30 days.

Buying a Bank Foreclosure

Once the foreclosure process has worked itself through the local legal process, one method of buying foreclosures is at a foreclosure auction. At a foreclosure auction the bank will usually be there to represent their interests (though some banks are simply walking away from some properties. Sometimes you will only find the first lien holder at the auction. If a property has several liens you could get a good buy.

At a foreclosure auction you typically need cash or a certified check in an amount of at least 20% of the bid price. The balance of the winning bid must be paid within a very short time frame - 2 weeks to a month.

While buying foreclosures at auctions is exciting, there are quite a few downfalls to bidding on houses at a foreclosure auction. Generally, you will have no idea about the condition of the house. Foreclosed property owners often neglect or sometimes destroy the property when being foreclosed upon. They may remove appliances (one house I purchased had the furnace removed, leaving frozen pipes that burst causing lots of damage), light fixtures and anything else. Finally, there may be multiple liens against the property. Check your local Courthouse records for other liens before bidding.

Sometimes the tenants/ex-homeowners won't leave. If you buy a bank foreclosure at an auction you are responsible for getting them out. You can resort to legal procedures or try to bribe them to move out.

If the house is "bought" by the bank at the foreclosure auction it becomes "REO" property (bank owned real estate) . Sometimes banks give their REO properties to certain real estate agents. Find ways to develop free foreclosure lists with a little work.

If you are interested in buying foreclosed property from the Federal Government visit: Free Government Foreclosure Listings

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