I'll post and update this page with foreclosed property purchase information:
If you have tips, you are welcome to comment.
Via Quora responses at: https://www.quora.com/What-is-the-process-for-buying-a-foreclosed-home
Here is some quotes taken from the above link: note that they are responses from 2013 and 2014 - if there are much updated information, it would be helpful
, Broker, Investor, Speaker, Market Analyst, CEO of PropertyRadar
With regard to a "foreclosed" home, which means it is now owned by the bank, it is exactly like buying any other home with a couple of key differences:
1.
The seller is a bank. They tend to be less responsive so don't expect a
quick response to your offer, or to any issues that come up during
escrow.
2. The seller has never lived in the property. As such their
disclosures about the property are worthless, and they are going to make
you sign something saying that you acknowledge that. Ultimately you
can't "sign away your rights", but it is super important that you do
your own thorough due diligence.
3. The property may be in need of
repairs. Before the 2008 crash the banks almost always fixed up the
property to market condition, now they do it in far fewer cases.
Depending on how bad the condition is it may affect your ability to get
financing.
4. Despite 3, there is NO requirement that your offer be
all cash (contrary to another answer). Some banks may have a preference
for all cash offers - but that is true of EVERY seller, bank or not.
5.
Fannie Mae actually gives preference to owner occupants giving them a
"First Look" where there offers are considered before investors. More on
that here: Special Offers and Incentives
.
6.
There is a very small possibility that you'll be the subject of
harassment or even a lawsuit by the prior owner. As a "bonafide
purchaser for value" you don't have much to worry about despite stories
to the contrary. Even if a court finds the prior owner was wrongfully
foreclosed on, the legal standard is that you get to stay and the fact
that the prior owner can't return to their former home is included in
the calculation of damages they get from the bank. Even if a court
somehow ruled otherwise, your title insurance policy would then kick in
to protect you from financial loss.
, http://www.bankforeclosuressale.com
There are 5 levels of foreclosure with purchase options in each one.
PRE-FORECLOSURE/COLLECTIONS
Owner
receives Notice of Default after missing payments for 3 to 6 months.
This notice is also recorded at the County Recorder’s Office. Buyer will
negotiate with owner
but must be able to pay off at least the amount owed on the mortgage
plus added late charges, fees and back interest. A traditional sale
happens here. You can go through a Realtor or you can use a title
company to oversee the transaction.
INTENT TO FORECLOSE
The owner receives a recorded Notice of Sale. The time between the notice and the sale allows the owner to complete a Short Sale. Usually the homeowner will list the property with a real estate agent. Any offers will need to go through the Realtor but they must have bank approval. This is long, drawn out process which can take months. There is a high degree of rejection in this process.
SHERIFF’S SALE
If
the owner is unable to sell the property before the date on the Notice
of Sale, the property will be auctioned in a Trustee Sale which
typically occurs on the steps of the county building. The property will
be publicly auctioned to the highest bidder - which is usually the lender.
The highest bidder must pay must have all funds
to pay for the purchase immediately (usually a 10% deposit and the
remainder within 24 hours). Generally there are no property inspections
and the property is sold “As Is” with no warranty as to condition. Any
liens written before the one under foreclosure are still active on the
property. The winner of the auction receives a trustee’s deed to the
property.
RIGHT OF REDEMPTION
The
redemption period is the period of time whereby the previous owner can
return and regain ownership of the property. The original owner can buy
back the home from whoever paid for it at the auction. A buyer can purchase the property from the original owner
but they must pay at least the auction price plus any county fees,
auction costs and interest which can be at an annual rate of up to 24%.
This time period starts from the sale date and can extend anywhere from
10 days (New Jersey) to almost two years (Tennessee). Only about half
the States offer a redemption period. The purchase can go through a
Realtor or be a private sale. Documents must be filed with the county
and the payment is made there also.
BANK OWNED PROPERTY (REO)
After the redemption period has expired, the highest bidder (usually the lender) now owns the property. Properties are usually listed with real estate agents.
Inspections are allowed. All liens have been removed and the property
can be purchased with a clean title. A traditional sale happens here.
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