Many people hear the term, “foreclosure,” but don’t really understand how foreclosures work and that there are different ways to purchase a foreclosure. A foreclosure occurs when a homeowner fails to pay multiple mortgage payments; therefore, the bank begins the process of repossessing the home.
Once a home is officially foreclosed, meaning the homeowner was unable to pay the bills after receiving a notice, there are three options for the bank to move forward with selling the foreclosed home.
The first option is called a short sale. This is when the homeowner is still involved and negotiates with the bank to work out a short sale. The short explanation of a short sale is that the bank/mortgage company allows the homeowner to sell the home for much less than what they owe. This allows a prospective buyer to purchase the home at a below market value price. However, finding a buyer can prove to be difficult as these homes are typically sold “as-is.”
The second option is selling the home at auction because the owner failed to make payments and decided against the short sale route. The bank delegates the minimum bid for the home, and prospective buyers will need to have at least 10% of the total purchase cost in order to purchase the home. However, even with a winning bid, the bank/mortgage company still has the right to decline the offer. In this route, the home is also sold “as-is.”
The third option for selling a foreclosure home is when the home becomes a “bank-owned” or “real-estate owned” property. Foreclosed homes are usually sold at a lower price point; however, they are typically all sold “as-is.” In addition, there is usually quite a bit of paperwork and a longer timeline involved as the sale needs to be approved by all the bank’s/mortgage company’s shareholders.
Navigating a purchase of a foreclosure is no easy task as it takes time, paperwork, and knowledge of the process to most efficiently secure an accepted contract. Give us a call today, we’d be more than happy to help you in your home search!