by Barbara Nevins Taylor
Foreclosure is a tragedy for most families who lose their homes. But it is also an opportunity for buyers.
Real estate attorney Adam Leitman Bailey author of Finding the Uncommon Deal is enthusiastic about the possibilities for buyers. “Never in American history have there been better deals than now.”
Tip 1 Look for a PRE-FORECLOSURE
Chose a neighborhood you like and begin to look for homes that are in pre-foreclosure. You want to find out if anyone needs to sell their property. Neighbors and friends are often good sources of information. A home in pre-forelcosure is more likely to be in better shape than a foreclosed home that has been vacant.
Leitman Bailey suggests you network, “Ask the neighbors. Listen when you go to a cocktail party, or a house party.”
Tip 2 Look at COURT RECORDS
You can also check records in the county clerk’s office. Every time a bank sues for foreclosure it files what’s called notice of pendency, or Lis Pendis.
NOTICE OF DEFAULT
In simple language, it’s a notice of default. The notice of default is usually sent to a homeowner 30 to 45 days after the first payment is missed. The notices are available to the public in the local courthouse or administration building. Some counties post everything online.
Tip 3 TALK TO THE HOMEOWNER
If you locate a property you’d like to buy and the homeowner still lives there, you might try simply knocking on the door.
Leitman Bailey says, “You want to use your social skills. You are going to start with, ‘Hi. How are you? I’m looking to buy a home for my family, and I understand you may be selling.’ Stop there and let them speak.”
If the homeowner is willing to talk, you might suggest a short sale and offer to pay less than what the homeowner owes the bank. Homeowners sometimes
Tip 4 Consider a SHORT SALE
If you agree on a price, call your attorney. Leitman Bailey warns that you’ll need a contract. “You want to have a contract with the seller saying that if they can sell and they get this number, they have to sell to you.”
But Mike Copley, Executive Vice President of TD Bank, says banks aren’t always quick to respond. “The caution there is that the negotiation for the final sales price may be a little bit stressful. Banks may not be willing to negotiate as quickly as the buyer may think and that takes time.”
Tip 5 Search NEWSPAPERS AND ONLINE SITES
When a property goes into foreclosure, some local governments list them in newspapers, and the newspapers often post the information online. Companies such as Property Shark and RealtyTrac compile all of this information and make it available online for a fee
Tip 6 Look for FHA FORECLOSURES
HUD, the VA and other agencies often take property after homeowners with government-insured loans default. These are listed online state by state and city by city at www.HUD.GOV.
Tip 7. Look up BANK OWNED PROPERTIES
Similarly, bank websites list foreclosed properties that they’ve taken back.
These big banks use the term Reo on their websites as short hand for Real Estate Owned. These are the foreclosed properties in the banks’ possession. You can easily search the websites for property in your area and you may be pleasantly surprised by what you find.
Attorney Leitman Bailey says, “I love the bank-owned property because you don’t have to worry about what mortgage you are buying, or what liens there are on the property.
A lien is placed on the property if the homeowner owes someone money, say a plumber or roofer, or there’s another mortgage outstanding. Make sure that no one has a claim to the home you want to buy.
Tip 9 Make sure you do a TITLE SEARCH
“The consumer really needs to know, is the title free and clear of any other liens or encumbrances prior to them taking over the home, “ says TD Bank’s Copley.
That’s why it’s important to use a professional title search company to research the property before you buy a foreclosure. Copley says, “The last thing you want to happen is you a buy a foreclosure and six months into it, you get a knock on the door or a letter in the mail saying, ‘You’re in my house. I have the title before you do.’”
Get a HOME INSPECTION
It is also important to try to get a home inspection. An inspection is an investigation of the structure and the mechanics including plumbing and electrical systems. You can hire a mechanical or civil engineer, or a licensed home inspector to do the job.
It’s money well-spent.
Tip 10 Try FORECLOSURE AUCTIONS
A home inspection may be impossible if you buy a house at a foreclosure auction. County sheriffs run foreclosure auctions regularly and there are opportunities if you are knowledgeable about the property and the process. But buying at auction is tricky. You are likely to find yourself in a small room with professionals who’ve investigated the property and know what it is worth. The bidding goes quickly and is often confusing for a novice.
Attorney Leitman Bailey warns, “It’s a risky game. You had better know the market and what it should go for.” Sheriffs usually list requirements for bidding on their websites. There is a protocol and cash is generally required in specific dominations at the time you bid.
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