Due to the recession there are more foreclosed homes available for purchase than ever before. These homes may offer a good deal to new buyers as these homes often sell far below market value. However, knowing when to buy that foreclosed home is an important first step.
When a buyer gets behind or cannot make his mortgage payment the bank sends a notification to the homeowner that it is about to foreclose on the property. This stage of the foreclosure process is called the pre-foreclosure and during this time the present owner has the legal right to remain in the home. In most cases they do so while trying to find the money to catch up on payments or simply because they have no place to go.
Once the foreclosure actually takes place the bank or lending institution may put the home up for auction. While at this point homes often sell at their very lowest, buying a home during this stage may still pose some problems as a reluctant owner may still be occupying the premises and if you purchase a home at this stage it will become your obligation to have the occupant removed. This is something most new home buyers don’t want or simply can’t deal with. Not just due to the time and effort involved, but also because of the emotional impact most home buyers experience having someone removed from their home.
If the home does not sell at the auction or if the bank decides not to auction the home then the bank will list the foreclosed home as a bank owned home for sale. In order to sell the home fast and get some of its money back the bank will often sell the home for 5% to 15% below the home’s current value.
In order to find out if the home really is being sold below the current value, you need to check and find out what the value of other homes in the immediate area are valued.
Foreclosed homes are not for everyone there are buyers who don’t like the idea of profiting from the misfortune of others and simply can’t bring themselves to purchase a foreclosed home. That is alright as there are plenty of homeowners who are selling their homes as well.
But for those who can find their way clear to purchase a foreclosed home the money they save may well be worth the effort. You could save 15,000 dollars on a home valued at $100,000, which is quite a savings indeed.