'We Buy Houses': A Foreclosure Rescue as the Solution to ...
How to Buy a Foreclosure
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Transcript of How to Buy a Foreclosure
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How to Buy a Foreclosure
The beginner's guide to foreclosure home buying
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Basic Tips for First-Time Homebuyers
• Try to get pre-qualified for a home loan. If your credit score is below 700, seek a credit repair service.
• If you have time, hire a contractor and appraiser to inspect the home.
• Run a title search on the property.
• If you are unsure of your ability to purchase a home on your own, hire a real estate agent.
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Is Your State Judicial or Non-Judicial?
In a Judicial Foreclosure state: • The lender sues the homeowner in order to
foreclose on the house.• Homebuyers in these states may have to
prove their ability to pay for the home in court.
In a Non-Judicial Foreclosure state: • The lender is able to foreclose without the
consent of a judge. • Home loans with a Power of Sale clause also
allow lenders to forgo the judicial process.
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Foreclosure Timeline
In a Judicial Foreclosure state: • The homeowner defaults on the mortgage. • If the debt is not paid back, a Lis Pendens
(LIS) is issued, informing the homeowner of the lender’s intent to sue.
In a Non-Judicial Foreclosure state: • The homeowner defaults on the deed of
trust. • If the debt is not paid back, a Notice of
Default (NOD) is issued, alerting the homeowner of the default.
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Foreclosure Timeline
During this Pre-Foreclosure Period, the homeowner has some options to stop foreclosure:• The best option is to pay back the
loan in full. • If this is not possible, the homeowner
may seek loan modification. • Homeowners determined to keep their
homes may file for bankruptcy.• The homeowner may also choose to
sell the home as a short sale.
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Foreclosure Timeline
In a Judicial Foreclosure state: • If the homeowner fails to alleviate the debt, the judge
will sign off on a Notice of Foreclosure Sale (NFS).• The home will be listed for sale at auction.
In a Non-Judicial Foreclosure state: • If the homeowner fails to alleviate the debt, the lender
will foreclose. • The property is listed for sale at auction.
This signals the start of the Auction Period.
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Foreclosure Timeline
During the Auction Period: • Potential homebuyers can bid on the home on its
scheduled sale date. • Auctions are very fast paced, so attending one as a
spectator first is recommended.
If the home fails to sell at auction, it becomes a Real Estate Owned (REO) property. This may happen if: • The home fails to meet an adequate minimum bid or • The lender is the highest bidder.
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Foreclosure Timeline
During the REO Period:
• The lender may attempt to sell the home itself, especially if the lender is a large bank with a dedicated REO department.
• However, not all REOs are sold by banks. Government agencies that provide home loans, such as HUD, FHA and VA, will often sell their foreclosures on their own.
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Benefits to Buying an Auction Home
• Auctions, also known as Sheriff Sales when conducted by a sheriff, are the most common type of foreclosure sale.
• It’s not difficult to predetermine your maximum bid if you research the prices for which similar foreclosures in the area sold. Run a title search and, if there’s time, have the home inspected. You want to subtract the cost of needed repairs and liens from your bid.
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Benefits to Buying a Short Sale
• Since the home hasn’t been foreclosed on yet, you’d be helping the homeowner and the lender by providing them with the money to pay off the defaulted home loan.
• Short sales provide plenty of time to have the property appraised and inspected for damages.
• You’ll be allowing the homeowner to walk away from the home with less credit damage than a foreclosure would cause.
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Benefits to Buying an REO
• REOs allow homebuyers to buy a foreclosure directly from the bank. Some homebuyers prefer this over buying through the homeowner or buying a home at auction.
• Foreclosures owned by government agencies tend to be very well maintained. This may be a huge plus if you are interested in minimizing the amount of repairs you may need to make as much as possible.
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