A foreclosure property is one of the interesting options that home buyers and investors like you may consider as you search the real estate market for your next purchase. As an experienced realtor and an investment guru, I can explain to you what a foreclosure property is and what the five stages of foreclosure are. I will also discuss the pros and cons of buying a foreclosure property so you can figure out if you should purchase one or not. Interested in learning how you can find foreclosure properties in your area or want help analyzing a foreclosure deal, contact me today!

What Is a Foreclosure Property?

A foreclosure property describes a real estate property that was seized by a lender after the owner fails to pay the mortgage installments according to the agreement. The property is sold by the lender to a new buyer to recover the remaining balance of the mortgage. The Balance explains that the lender has the legal right to foreclose the property since the mortgage forms a lien against the property.

What Are the 5 Stages of Foreclosure?

The foreclosure process and timeline may differ with each U.S. state, yet these are the typical stages that are involved in most foreclosures:

• Stage 1: Missed Mortgage Payments: The borrower is unable to make the mortgage payments on time or at all.
• Stage 2: Notice of Default: The lender records a Notice of Default (NOD) or public notice with the County Recorder’s Office if the borrower misses payments within a three to six month period.
• Stage 3: Pre-foreclosure: The borrower is entitled to pre-foreclosure after receiving a NOD. Pre-foreclosure refers to a grace period that ranges from 30 to 120 days.
• Stage 4: Foreclosure Auction: The lender will sell the foreclosure property at an auction, which is also called a Trustee Sale.
• Stage 5: Post-foreclosure: The lender becomes the owner of the foreclosure property if nobody buys the property during the auction. According to Zillow, this real estate-owned (REO) or bank-owned property is sold at the open market or liquidation auction.

Should I Be Targeting a Foreclosed House for My New Purchase?

As a home buyer or investor, you may be wondering if you should buy a foreclosed house or not. Let me share the advantages and disadvantages of a foreclosure property purchase:

Pros

• Affordable Price: Most foreclosed homes are affordable because of their marked-down price.
• Extra Savings: Purchasing foreclosed houses involve other financial perks, such as minimal down payments, reduced interest rates, and zero appraisal fees.

Cons

• Property Issues: A foreclosed home is usually in less than ideal condition because of poor maintenance.
• Unexpected Expenses: A foreclosed house may need extra renovation or repair work. It may also require other expenses like liens and back taxes, based on Investopedia resources.

Get Expert Advice on Foreclosure Properties From an Experienced Realtor

Buying a foreclosed home can be financially beneficial for home buyers or investors such as yourself if you are willing to take on the challenging aspects of your real estate purchase. If you need guidance on deciding if you should buy a foreclosure property or not, you can consult with an experienced, knowledgeable realtor like me who has been selling homes for a decade. Contact me today to start exploring the possibility of purchasing a foreclosed house.

Sources:

https://www.thebalance.com/what-is-a-foreclosure-1798185

https://www.zillow.com/foreclosures/overview/what-is-a-foreclosure/

https://www.investopedia.com/investing/buying-foreclosed-home/