The Foreclosure Process
A foreclosure occurs when an owner defaults on the mortgage payments for a property. Property in foreclosure is often referred to as distressed property because the owner is in financial distress and has usually missed several mortgage payments. A variety of unfortunate circumstances can lead to a foreclosure, but it often presents potential bargains for interested buyers and investors. A typical foreclosure timeline can extend more than three months, and the different stages in the foreclosure process offer different types of opportunities for buyers.
Pre-Foreclosure
A mortgage default can often be resolved during the pre-foreclosure period. During this time, buyers can approach the owner in default with an opportunity to escape the situation-free of mortgage debt and without a foreclosure on his or her credit history. A Pre-foreclosure offer potential discounts of 20 to 40 percent below market value, while giving buyers the opportunity to research the title and condition of the foreclosed property.
Foreclosure Auction
If the default is not resolved by the end of the pre-foreclosure period, a trustee that is working on behalf of the lender schedules a public auction. Buyers are typically required to pay in cash and may not have much notice to research the foreclosed property beforehand; however, a foreclosure sale often offers some of the best bargains, sometimes as much as 35 to 50 percent below market value.
REO (Real Estate Owned)
Sometimes the lender will buy back the property and resell it if it thinks that is the best way to recover any losses on the property. The lender will probably make sure the title is clear for any buyer, but the potential bargain is typically less than buying a pre-foreclosure or at foreclosure auctions.
BankHomesDirect offers its members free REO foreclosure listings. If you are looking for pre-foreclosures, foreclosure auctions and other types of foreclosures, check out our sister site, RealtyTrac
