What are house foreclosures?
A house foreclosure happens 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. The owner’s financial distress can be caused by a variety of unfortunate circumstances, but it often results in a potential bargain buying opportunity for an interested buyer or investor.
House foreclosure buying opportunities in Katy, Fulshear, Richmond, Sealy and Cypress.
The foreclosure process doesn’t just happen overnight. A typical foreclosure timeline can extend more than three months. The different stages of foreclosure offer different types of opportunities for the buyer.
Pre-Foreclosure: Buying a property in pre-foreclosure involves approaching 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. For the buyer, pre-foreclosures offer potential discounts of 20 to 40 percent below market value, but still give the opportunity to research the title and condition of the foreclosed property.
Foreclosure Sale: If the default is not resolved by the end of the pre-foreclosure period, buyers can attend a public auction scheduled by a trustee that is working on behalf of the lender. Buyers are typically required to pay in cash and may not have much notice to research the foreclosed property beforehand; however, a house foreclosure sale often offers some of the best bargains, sometimes as much as 35 to 50 percent below market value.
REO (Real Estate Owned by the Lender): 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 pre-foreclosures or at house foreclosure sales.
When buying a foreclosure you must know that each REO property is different depending on the financial institutions that own it. Almost anything can happen all the way up to settlement, sometimes even after settlement occurs! You must have an agent that is knowledgeable in how the process works. I have had experience on both sides of the foreclosure process. Let’s look at some questions that often arise in foreclosure transactions.
- Are there any consequences if the Seller’s addendum states that the Buyer must waive their write to receive a Property Owner’s Association Package?
- Will I, the Buyer, receive a copy of the signed Regional Sales Contract back from the bank and the bank’s counter addendum?
- As a buyer, what are the risks related to the bank being able to void the contract at anytime and for any reason?
- Do I, the buyer have to use the settlement company that the listing company recommends? Will this help my offer?
- What does “AS IS” really mean?
- Should I, the Buyer, plan on countering the Bank’s counter offer? Or is it a waste of my time?
- What if I, the Buyer choose not to sign the Bank’s Addendums?
These are just a few questions that I deal with on a daily basis in real estate. I am dedicated to providing my clients the time it takes to help them through this complicated process, which is always changing.