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Best Places to Look for Foreclosures
Author David Schneider | Dec 31,2007
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Foreclosures are homes that are available for sale because the previous owner was unable to make the mortgage payments. You have probably heard stories about mortgage banks being so desperate to get rid of the properties that they sell them for “pennies on the dollar.” While this may have once been the case, today the foreclosure market is almost as tight as the regular housing market. However, there are still great bargains to be had if you know how and where to look.
Buying a Foreclosure
If you are interested in purchasing a foreclosed home, whether for your personal residence, a rental property or to begin a real estate investment strategy, first you must understand the foreclosure process and when a buyer may become involved. There are three points at which a home sells in the foreclosure market.
First, there is the “pre-foreclosure” period. This is when the homeowner has defaulted on the mortgage loan, but the lender has not yet completed the foreclosure process. Since loans that are in default are usually listed with the county sheriff or auditor’s office, finding these situations is not difficult. You may then be able to contact the homeowner and arrange for a sale before the foreclosure process goes any further.
If the lender does foreclose on the home, the next step is the foreclosure auction. At this time, the bank will set a minimum bid price that includes the mortgage price and any other known liens on the property. In many cases, the minimum bid is higher than the current market value of the home.
If you choose to bid on a property at this stage, you will need to have cash or a cashier’s check for the entire amount of your bid. For many home seekers or novice investors, it can be a challenge to come up with such a large sum. Another challenge is that foreclosure auctions are as-is.
Many times, foreclosed properties do not sell at the foreclosure auction because the minimum bid exceeds the market value of the home. At this point, the home reverts to the lender and is an REO (real estate owned) property. Mortgage lenders often have entire divisions devoted to REO property sales. They may sell these properties directly to the public or through a real estate broker. Banks today will attempt to recover as much value as possible from the sale of the home and are not likely to sell the home at a great discount. However, it is not unheard of for REO homes to sell for five to ten percent below market value. REO sales are becoming a popular option for buyers seeking reasonable bargains with less risk.
Where to Find Foreclosures
Now that you understand when and how you can buy a foreclosed home, the next question could be where to look. There are a number of places to look for information on foreclosure properties, including government agencies, mortgage lenders, real estate agencies, online auctions and paid services. Let’s look at all of these.
Government agencies are a great place to look for foreclosed homes. The federal government is involved in the housing market through a variety of agencies. Housing and Urban Development (HUD), the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), and quasi-governmental agencies Fannie Mae and Freddie Mac are all good places to start your search for foreclosure listings.
While a single, streamlined database inclusive of all government-foreclosed properties is not yet available, each of these agencies makes its own listings available to potential buyers. However, searching these agencies will only yield lists of foreclosures where the federal government is involved. To see listings of all foreclosed homes in your area, including those through private mortgage lenders, you can contact your county auditor or sheriff. Listings are not always complete, but they are free and easy to access.
Another place to look for foreclosures is with mortgage lenders. As mentioned earlier, most of the larger national mortgage companies have REO property sales divisions. Since it’s in their best interest to advertise these properties everywhere, banks make their REO sales lists easily accessible to potential buyers.
Some real estate brokers or agencies may also include foreclosed properties in their listings. Searching the listings of brokers in your area for “corporate owned” properties will yield a list of any foreclosed or REO properties available. You may even be able to customize your search by location, home size, price range or other feature.
While you are online, check out the popular auction sites for listings of foreclosed properties. You can also do a search for “free foreclosure database” or “free foreclosure listings.” However, be mindful about your search. If you run across an agency, individual or training program offering services for a fee, make sure you know exactly what you are getting for your money. Plain old research at the library, in the media and at the county courthouse is probably enough to help you find the foreclosure listings you need.
Looking for a foreclosed property may not be as easy as house hunting in the conventional housing market. It takes diligent research, a complete understanding of the foreclosure process and a lot of patience. Knowing where to look for foreclosures is the key to finding the perfect home or investment opportunity.
Foreclosures are homes that are available for sale because the previous owner was unable to make the mortgage payments. You have probably heard stories about mortgage banks being so desperate to get rid of the properties that they sell them for “pennies on the dollar.” While this may have once been the case, today the foreclosure market is almost as tight as the regular housing market. However, there are still great bargains to be had if you know how and where to look.
Buying a Foreclosure
If you are interested in purchasing a foreclosed home, whether for your personal residence, a rental property or to begin a real estate investment strategy, first you must understand the foreclosure process and when a buyer may become involved. There are three points at which a home sells in the foreclosure market.
First, there is the “pre-foreclosure” period. This is when the homeowner has defaulted on the mortgage loan, but the lender has not yet completed the foreclosure process. Since loans that are in default are usually listed with the county sheriff or auditor’s office, finding these situations is not difficult. You may then be able to contact the homeowner and arrange for a sale before the foreclosure process goes any further.
If the lender does foreclose on the home, the next step is the foreclosure auction. At this time, the bank will set a minimum bid price that includes the mortgage price and any other known liens on the property. In many cases, the minimum bid is higher than the current market value of the home.
If you choose to bid on a property at this stage, you will need to have cash or a cashier’s check for the entire amount of your bid. For many home seekers or novice investors, it can be a challenge to come up with such a large sum. Another challenge is that foreclosure auctions are as-is.
Many times, foreclosed properties do not sell at the foreclosure auction because the minimum bid exceeds the market value of the home. At this point, the home reverts to the lender and is an REO (real estate owned) property. Mortgage lenders often have entire divisions devoted to REO property sales. They may sell these properties directly to the public or through a real estate broker. Banks today will attempt to recover as much value as possible from the sale of the home and are not likely to sell the home at a great discount. However, it is not unheard of for REO homes to sell for five to ten percent below market value. REO sales are becoming a popular option for buyers seeking reasonable bargains with less risk.
Where to Find Foreclosures
Now that you understand when and how you can buy a foreclosed home, the next question could be where to look. There are a number of places to look for information on foreclosure properties, including government agencies, mortgage lenders, real estate agencies, online auctions and paid services. Let’s look at all of these.
Government agencies are a great place to look for foreclosed homes. The federal government is involved in the housing market through a variety of agencies. Housing and Urban Development (HUD), the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), and quasi-governmental agencies Fannie Mae and Freddie Mac are all good places to start your search for foreclosure listings.
While a single, streamlined database inclusive of all government-foreclosed properties is not yet available, each of these agencies makes its own listings available to potential buyers. However, searching these agencies will only yield lists of foreclosures where the federal government is involved. To see listings of all foreclosed homes in your area, including those through private mortgage lenders, you can contact your county auditor or sheriff. Listings are not always complete, but they are free and easy to access.
Another place to look for foreclosures is with mortgage lenders. As mentioned earlier, most of the larger national mortgage companies have REO property sales divisions. Since it’s in their best interest to advertise these properties everywhere, banks make their REO sales lists easily accessible to potential buyers.
Some real estate brokers or agencies may also include foreclosed properties in their listings. Searching the listings of brokers in your area for “corporate owned” properties will yield a list of any foreclosed or REO properties available. You may even be able to customize your search by location, home size, price range or other feature.
While you are online, check out the popular auction sites for listings of foreclosed properties. You can also do a search for “free foreclosure database” or “free foreclosure listings.” However, be mindful about your search. If you run across an agency, individual or training program offering services for a fee, make sure you know exactly what you are getting for your money. Plain old research at the library, in the media and at the county courthouse is probably enough to help you find the foreclosure listings you need.
Looking for a foreclosed property may not be as easy as house hunting in the conventional housing market. It takes diligent research, a complete understanding of the foreclosure process and a lot of patience. Knowing where to look for foreclosures is the key to finding the perfect home or investment opportunity. |
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