Foreclosure Buying 101 - How a Home Gets Foreclosed Upon
It seems that the lure of "easy money" is once more sweeping across the nation, and this time it comes in the form of foreclosure homes. Across the United States, both novice and veteran real estate investors are trying to capitalize on the abundance of foreclosed homes that are available right now.
It's easy to understand why. If you know what you're doing, you could purchase a foreclosure property for less than market value. This is good for home buyers who plan to live in the home, and it's even better for investors who buy (and resell) these homes for a living.
If you are interested in this type of investment opportunity, the first thing you should learn is the basic path to foreclosure. Actually, this process varies a bit from one state to another. But the overall process goes something like this:
- The homeowner defaults on the loan by missing mortgage payments.
- The lender will correspond with the homeowner in some way, often by sending a letter regarding the missed payment(s).
- The homeowner may work with the lender to get caught up on back payments through such tactics as reinstatement (lump sump payment) or repayment plans.
- If the homeowner continues to miss payments on the loan, the lender will start the foreclosure filing process. *
- The homeowner may try to sell the home through a real estate short sale.
- If the home is not sold via the short sale process, the lender will foreclose and make an announcement of a forthcoming sale / auction.
- The lender will try to sell the property through a real estate auction.
- Eventually, the home will be sold to a new owner in some manner.
* Item #4 is one of the steps that varies from state to state. The process that lenders must go through to file for foreclosure may take days, weeks or months, depending on the state laws.
This is obviously a simplified version of events, but it should give you a better understanding of the basic process in place here. Understanding this process is the first step to buying a foreclosed home successfully ... and profitably.
Share this: