Home Buying Guide|
Buying Foreclosed Homes - Bank, HUD and Government Foreclosures
Foreclosed homes are ones that are offered for sale after the entity that insured or held the loan received the property
back as a result of default meaning that the homeowner failed to pay his/her mortgage payment. Foreclosed home sales are completely
different than homes offered as "short sales". For more information about short sales click here.
A few commonalities exist for each type of foreclosed property (Bank owned, HUD and government foreclosures) including...
There 2 main types of foreclosures / foreclosed homes based on who currently owns them and is offering them for sale. They are...
- Properties in foreclosure take many months before the process is complete and the property becomes available to purchase.
- As a prospective buyer, the bank, HUD, VA, etc. will NOT negotiate directly with you. In fact, unless it is a
small local bank / credit union that now owns the property, the real estate agents (listing and buyer's agents)
will never talk the entities in possession of the property. An asset management company handles all dealings with the entity that owns the property and is the go-between
for the bank and listing real estate broker. Often buyers will ask "what will the bank take?" and since the agents
don't talk directly to the banks it is a question that real estate agents cannot answer with any certainty.
Are Foreclosed Homes a Good Deal to Buy?
- Bank Foreclosures / Bank Foreclosed Homes
In this situation a bank lent the money out to a borrower (or borrowers) via one or more "conventional" loan(s) and the borrower defaulted on their mortgage payment meaning they did not make their payments.
After a period of time and notifications sent to the borrower(s) when the bank is not paid,
they foreclose on the property and take it back.
- HUD Homes / Government Owned Homes / VA Homes
These are all homes that were purchase via government back mortgage programs such as FHA or VA meaning that the buyers
used FHA or VA financing to purchase the home. Since these loans are backed by the federal government, when the purchaser
defaults they go back to the government. Foreclosed homes where the previous buyer used FHA financing would end up as HUD homes
when the mortgage went unpaid.
Sometimes yes, sometimes no. Sometimes the cost to complete those repairs is so great that
it just isn't worth it. In other words, you might be able to purchase a home that costs the same (already fixed up)
that would be equivelant to the cost of a home in bad shape + the $$ you needed to put into to it to fix it up.
City Required Repairs
Entities that own repossed homes (foreclosures) don't fix houses up so if the city in which it is located requires repairs, you as the buyer will be responsible for
completing all required repairs. Sometimes a copy of a city inspection is available so you will know what is needed
in advance and then sometimes it is not and you take the risk of buying the home not knowing what will be required.
Keep in mind...
There are always risks in purchasing a foreclosed home. Risks are the trade off for getting a home at a lower price. If you have limited cash
on hand to work with, foreclosed homes are probably not for you. Obtaining financing (a mortgage) on a foreclosed home may not
always be possible either so you might have to pay cash for the home and cash for all required repairs.
But not to worry, if you are on a budget and find that bank foreclosure homes are not the right fit for you,
there are plenty of privately owned homes that are a great value, in good shape and ready to move into.
Steve can help you find them and will walk you through the home buying process!
|It is a GREAT time to buy a home so take advantage of today's low
home prices and low interest rates.
The cost to you to receive expert buyer representation provided by Steve Hatfield is ZERO $$!
That's right...FREE Buyer Representation!!
Put Steve Hatfield's 23 years of experience to work for you... Contact Steve now!
Buyer's Guide Next Topic: Short Sales
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Steve Hatfield, Realtor® provides professional real estate / home buying services to buyers and sellers in Dearborn Michigan, Dearborn Heights Michigan, the Wayne County MI (Southeast Michigan) communities of Livonia, Canton, Redford, Westland, Garden City, Plymouth, Northville and the Oakland County cities of Farmington / Farmington Hills and Novi Michigan.
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