Want to Buy a Foreclosure? Read Here First
Risks and Rewards in Procedure
The rash of foreclosures in recent years has opened up many opportunities for buyers to get good deals by pursuing foreclosure sales. The fact that more and more people are trying to take advantage to such potential deals is attested to be the fact that a full 20% of all home sales in April of 2012 consisted of foreclosure resales. Buying into this market does contain some pitfalls and obstacles so potential investors should be wary and properly assess the risks involved.
Nationally, foreclosure sales appear to have peaked. The numbers of new foreclosures in April of 2012 for instance were 3% below the amount registered in April of 2011. A new wave of foreclosures may be in the offing now that a settlement has been reached between federal regulators and a group of lenders accused of illegal activities surrounding foreclosure proceedings. One of the issues was the so called “Robo signing” of documents that were legally required to be hand signed. The lenders had agreed to put foreclosure proceedings on hold while the matter was litigated. Now that a settlement has been reached, there could be as many as 450,000 additional homes set to receive foreclosure notifications.
The regions that have been hardest hit by foreclosures are the same spots that saw the greatest rise in real estate prices in the early years of this century. These include such cities as Sacramento. Miami, Atlanta, and Las Vegas. Prices in Las Vegas have plunged over 60% from their peak levels in 2006. Meanwhile in Riverside, CA, about 1.5 of every 1,000 homes received a foreclosure notice just in the month of April 2012.
How to Buy a Foreclosure the Right Way
It is possible to purchase a home from a home owner threatened with foreclosure before they receive official notification. It is also possible to purchase home through auction sales although you will be competing against seasoned pros when doing so. It is safer to buy a foreclosed home that is now owned by a bank or other lender. Such property may be inspected before making a bid. This can be critical since foreclosed property is generally offered “as is.” The former owners may have stopped doing maintenance and so the house may require costly repair.
Since the foreclosure market moves so quickly and in such competitive fashion, it is important to secure the financing of a purchase in advance of making a bid. The former owners will already be removed from the site so there will be no need for evictions. There is also little likelihood that there will be any property liens in these transactions since the lender will have already conducted a title search.
Savings of up to 40% over comparable non foreclosure sales can be achieved by buying a foreclosed home. There is however little or no room for negotiating any price reduction in the amount the home is being offered for. It also pays to have the home professionally inspected to determine the exact condition the property is in.