how much do you need to buy a foreclosure

However, if you’re buying a house in sub-par condition or in an area that has been hit hard by the mortgage crisis, a longer market time is expected.
Until all the houses on the block are sold, there is going to be one foreclosed house bringing down your property value.
If you are buying your home with a mortgage loan, you have more flexibility on the price, since the initial down payment is going to be around 20% of the house.
For example, a good property in an up-and-coming neighborhood will be purchased quickly – usually by a investor or an eager person looking for a new house.
Multiply that by your home’s livable area to determine an “average” price for your house.
Unless your house is in excellent condition and there is not much work to do on it (in which case, paying average is great!), look at the bottom two-thirds of the prices.
You can make an offer to purchase a property when it’s in pre-, when the lender agrees with the homeowner to accept less than the outstanding balance of a mortgage loan and avoid .
Regardless of which phase you are attempting to purchase the property, how do you begin the process? There is a growing selection of foreclosed homes to choose from across the country, as today’s faltering housing market yields hundreds of thousands of these properties.
So [buyers] kind of end up in the same position as the people who currently own the house in that [they] can’t get financing or can’t afford the financing that’s out there,” says Bobbi Dempsey, co-author of “The Complete Idiot’s Guide to Buying Foreclosures” (Alpha).
One caveat: When you buy a property at an auction, be sure you have investigated the “right of redemption” law, which means homeowners can reclaim their property within a certain period of time if they pay all past-due amounts and applicable fees for the property.
According to Dempsey, foreclosure sale ads from the U.S. Department of Veterans Affairs (VA) and the Federal Housing Administration (FHA) are posted in the newspaper on a regular schedule; her book advises readers to contact the classified manager at the paper for the schedule.
Many buyers go through real estate agents who specialize in foreclosures, but if there’s a particular property you have an eye on, Blomquist says you can approach the lender directly after the foreclosure but before it’s listed for sale.
First of all, if you’re new to the foreclosure market, don’t even think about buying a property at a foreclosure auction, says RealtyTrac vice president Daren Blomquist.
If you’re seeking to purchase a foreclosure with an FHA loan, Blomquist says the requirements pertaining to the condition of the property are stricter.
The bank that owns the title isn’t going to make needed repairs for you before the sale, and it’s unlikely to lower the price to compensate you for repair expenses you’ll incur.
Factor the cost of any necessary repairs into your budget, since foreclosures are generally sold “as-is.” “Be aware with these REO or bank-owned properties that a lot of them are in pretty poor condition,” Blomquist says.
The bank is required to pay off senior liens like back taxes, you won’t have to kick out anyone living there and you’ll be able to inspect the homes for damage and figure out how much you’ll need to set aside for any repairs.
An increase in foreclosure activity might sound like bad news, but it’s actually a good sign for these markets because it means the logjam that’s been keeping housing in the doldrums is finally starting to break up.
Prospective buyers can’t inspect the home to determine if there’s any damage — highly likely if the house has been vacant for a while — or find out if there are any senior liens (such as outstanding taxes owed on the property).
While many of these properties will in fact sell for less than what you might consider “market value,” a perceived under-priced offering in today’s market is like chum tossed into the shark tank; every would-be buyer on the sideline, including a lot of well-financed investors, is jockeying for a piece of the action.
Remember, when we are talking about short sales (sales in which the seller’s proceeds will be less than his outstanding mortgage debt) and foreclosures (sales in which the lender is now the owner and seller), we are talking about banks in the position of ultimate authority.
Banks have to consider the costs of holding an unsold, non-income producing inventory or, in the case of the short sale, increasing this inventory through yet another foreclosure.
There are some great deals out there!” Or, your friend tells you, “I paid 150 percent below market!” And, except for the “150 percent” part (which most math majors will know is not possible), these statements have merit.
Great deals on foreclosures and short sales are definitely out there, but you may run into financing roadblocks when it comes time to buy.
Buyers can expect a discount of 10% to 25% compared with buying a home through traditional channels, says Dean Street, an agent and 30-year veteran of foreclosure buying in the western U.S. But the road to auction can be bumpy, too.
Another hassle: Most foreclosures that go to auction get postponed, usually due to bankruptcy or loss mitigation (when the bank tries to compromise with the borrower), says Chris Matty, marketing director of He notes that opening bids also change frequently, especially as home values are marked down further.
It takes 100% cold hard cash in the form of a cashier's check if you are to walk away from the sale a new property owner.
Although there may be the occasional steal or deal to be made out there, it takes a lot of guts, savvy and determination to successfully purchase a property on the steps of the county courthouse.
The opening bid for a trustee's sale will typically begin at the loan amount of the trust deed plus the amount of the default, attorney's fees, trustee's fees, transfer fees, etc.
Some of the best opportunities are available even before the short sale or foreclosure process begins on a property.
With loan amounts at all time highs it makes it quite difficult to be able to pay cash at the time of sale unlike it did in the early 90's.
If you are going to the courthouse steps to buy it at the auction, then you need 100% cash (or cashiers check).
When using a conventional loan to purchase foreclosures, the down payment requirement varies between 10 and 25 percent, with lenders often requiring at least 20 percent for the purchase of primary or investment property.
There is no mortgage made specifically for purchasing foreclosures, but the amount required as down payment for this kind of distressed property depends on the type of financing the buyer uses to purchase it.
Hard money loans from private investors, which require a high down payment — at least 35 percent — and cost more, often are used to purchase foreclosures in poor condition.
The Department of Veterans Affairs (VA) and Navy Federal Credit Union require no down payment, but only buyers affiliated with the military can apply for these loans.
An all-cash transaction does not rely on the buyer having a sufficient down payment and the property meeting stringent lender guidelines to obtain financing.
To compete with all-cash bidders, a financed borrower ideally would have a strong down payment of at least 20 percent, good credit and strong reserves.
A foreclosure sale, also known as real estate owned by the bank (REO), gives lenders a chance to recoup a portion of their losses after foreclosure.
Buying a foreclosed home can be a way to purchase a residential or investment property at a significant discount.
While the majority of your sale can be financed through a mortgage, you need to make an initial deposit to secure your purchase.
When you buy a foreclosed property, you do not need to pay off the whole purchase at once.
Closing costs increase with loan amount and additional services such as escrow and prepaid property taxes, mortgage interest and homeowners insurance.
When financing a foreclosure, you’ll need money for a down payment, closing costs and repairs if the home is in poor condition.
A study by real estate website showed that in 2013, the average national discount on foreclosed properties had dropped to 7 percent.
Banks may be willing to cover buyer closing costs on a foreclosure, generally up to 3 percent of the sale price.
Buyers must consider the amount of money it takes to bring a foreclosed home up to livable standards.
Mortgages backed by the Federal Housing Administration (FHA) require the lowest down payment, whereas non-government-backed conventional loans require at least 5 percent down.
In the most expensive states, closing costs ranged from approximately $4,500 to more than $5,000 for the same loan amount.
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Why would anyone be interested in buying a property at auction? Auctions offer a first chance to snap up certain properties, so in theory, some of the best properties get purchased at auctions.
Auction properties aren’t always great deals, but the potential to get a great deal is such a big draw that, for many people, it compensates for the numerous potential drawbacks of buying an auction property.
Auctions can be a riskier way to purchase a property than buying a property through a real estate agent, so it’s important to be extremely well-educated about the process and about the properties you are interested in bidding on.
The other main way a home ends up at auction is when the owner doesn’t pay property taxes or becomes severely delinquent on state or local income taxes.
Winning bidders will pay any auction fees and/or bidding fees and put down an earnest money deposit on the property they are purchasing before leaving the auction site.
Bidders at property auctions are often real estate investors who can afford to pay cash, but for auctions that allow financing, it is best to get prequalified ahead of time.
Bidders can avoid this problem by working with an auction house to ensure that the property has clear titles.
If a property winds up at auction, it means the owner was having financial trouble, so the house may have deferred maintenance problems.
We got a bidder’s card, talked to the bank reps and found out that one house we saw and researched had an opening bid within our budget and under the assessed value of the home — so we bid on it! Two other investors counter-bid a few times, but we won the bid and got our first house at the foreclosure auction.
My husband and I have just recently achieved our long-time goal of buying a foreclosed house, turning it into a rental property and creating a steady stream of income from the monthly rent we collect (at 17 percent profit on the initial cash investment every year).
Very good post! I have thought about buying a foreclosed property, but really don’t have the time to invest in researching the area, heading to the courthouse, renovating the house, etc.
After you identify a few houses in your chosen location or size range, research each offered property’s sales and tax history, as well as its current assessed value on the County Property Appraiser’s website, which are all public record.
Once you hear this number you will need to evaluate on the spot whether purchasing the property is financially feasible given your cash budget, current market conditions, the research you did on the property and your personal criteria and plan for the investment.
Next, research each property owner (also listed on the County Appraiser’s property record page) online via the County Clerk of Courts Public Record Search because whatever that the owner owes regarding that property outside of the loans (liens, back taxes, etc.), you will owe when you purchase a foreclosure home.
Our county publishes a twice-weekly list of the properties to be sold at the foreclosure auction held each Tuesday and Thursday at 11 a.m. A large portion of our time each week is spent physically viewing the properties and researching them online or in the courthouse books.
Instead, you need to start the bidding at the acceptable opening bid amount for each property, which is the lowest amount the bank is willing to accept for a property at the auction that day.
People get the idea they can buy a house at auction for $100 because they have heard that someone “bid on behalf of the plaintiff (the bank) for $100.” But auction buyers cannot counter the bank bid at $150 dollars.
After first calling the trustee listed on RealtyTrac and confirming the property is still in default, you should contact the owner and let them know of your interest in the property and try to arrange a meeting with the owner to discuss a possible sale and to get a better look at the property.
To determine how much you will pay the seller for the home, you should subtract all your costs as a buyer (loan balance, additional liens, repair costs) from the estimated market value of the property and use that number as a basis for your negotiations with the owner.
When a property is in pre-foreclosure (NOD, LIS), the owner still has a chance to stop the foreclosure process by paying off what is owed or by selling the property.
The owner may be pursuing other options to cure the default; however, an offer from a pre-qualified cash buyer may be the best solution to get the owner out from under the impending foreclosure.
KNOWING that most foreclosures will OFTEN elect to MAKE no repairs.  If  no repairs jeopardizes financing then you all wasting time.  If property is distressed (needs a new roof, plumbing problems, lacks appliances – then FHA loan option is quickly off the table.
Think of a foreclosure as a property owned by a bank, who is selling it "as is" which means they will not do any work on the property. Some foreclosures are in very good shape, others are not.  Once you find one that is in relatively good shape, get pre-approved to purchase the property.
There may be a few more hoops you’ll have to jump through for things like inspections and what not, but it’s still the same process. I recommend you speak to a lender like myself who would be glad to help you get the loan that you need. So if you have any other questions or need a loan, please contact me through the information on my profile page.
Another option to explore is a 203K scenario – LOTS more time, paperwork and not many lenders offer as a LOAN PRODUCT  — longer closing time – which also not always the MOST attractive offer to a bank trying to dispose of a property.
may give you some clue as to the condition of the property.  CASH ONLY is a HUGE RED FLAG for me.  That means it will not qualify for a regular loan.  This could mean extensive repairs, major structural issues, etc.
A cash offer is not the only way to purchase a bank owned (foreclosure property).  The condition of the property is what drives what financing that you can get, not who the owner is.
While buying a foreclosed home may seem like the best way to get a real deal on your new home, “Foreclosures are more of an investment vehicle than a way to get the home of your dreams,” according to Ryan Slack, CEO of Property Research Partners.
A real estate agent who is knowledgeable about the foreclosure process can provide valuable tips and may be your best advocate during a pre-foreclosure purchase.
While the process is lengthier than the traditional real estate purchase transaction, and fraught with delays and problems, you may still get a decent discount on price.
Offers to purchase foreclosed homes are generally countered by the lender and usually for price, but there may be other terms of the purchase agreement that the lender takes issue with.
While this part of a traditional real estate transaction is usually completed within a week, with the lender as the seller it has the potential to drag on for a lengthy period.
Buying directly from the lender is the safest way for the average homebuyer to purchase a foreclosure.
What about the average consumer in the market for a home to live in who just wants a deal? Many of these non-investor type buyers hear the wild tales of deeply discounted foreclosed homes and want in on the action.
If no bids match or exceed the opening bid, the trustee purchases the property, in the lender’s name, and it becomes what is known as Real Estate Owned, or REO.
Pre-foreclosure sales are popular with professional real estate investors, as they offer huge discounts off the home’s market value.
This auction is another situation where the average homebuyer will be competing against seasoned real estate investors with deep pockets.
After the reinstatement period, if the homeowner fails to bring the loan current, the lender will sell the house at auction.

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