Bank foreclosed homes are a double edged sword. With the recent downfall of the economy a glut of homes have come into foreclosure displacing 1000’s of families across the country. This is an extremely unfortunate circumstance for these poor families who were allowed to purchase homes beyond their means.
Over Financed Mortgages
Many were allowed to finance 100% of their mortgages with interest only payments and with loss of jobs, refinancing coming due and other circumstances this has presented an opportunity for others to profit from these foreclosed homes.
Financial Institutions are anxious to recoup as much of the loan as possible and there is a unique opportunity to pick up both low income housing, middle class housing, upscale high end housing and vacation properties never available at these prices.
You hear alot about bank foreclosures in the news these day but unless you’ve been involved in a foreclosure you probably don’t know exactly how it works. Before you decide to get involved in purchasing and/or flipping foreclosures you should understand how the process works…
The Foreclosure Process
Did you know that if you miss even one mortgage payment you could be in danger of having your property entering foreclosure? Generally it will take 2-3 months of missing payments before the process begins but it’s crucial you make all payments on time in full.
If you do miss a payment you will receive a letter from your banking institution requesting payment immediately, not a good sign and not good for your credit.
Step One: Notice To Accelerate
After you’re 60 days past due you will receive a “Notice To Accelerate”. Once this happens you are required to bring the loan “current” to prevent or stop the foreclosure process. You are required to pay all past due payments and applicable late fees assessed and possibly attorney fees.
Step Two: The Demand Letter
Not responding to the mortgage companies Notice To Accelerate will result in The Demand Letter. The Demand Letter involves an attorney, the attorney will send you The Demand Letter formally stating that if you do not bring the loan current immediately the foreclosure process will begin in the courts.
Step Three: Notice Of Default
Okay so you haven’t responded to the Notice To Accelerate or The Demand Letter now what? Now the lender (usually their attorney) will file a formal foreclosure document notice with the court in your jurisdiction. On this document will be listed the entire amount needed to be paid, you have anywhere from 15 to 30 days to take action to this judgement before Step Four…
Step Four: The Notice Of Sale
Now 15 to 30 days have passed with no action on your part i.e. settling your loan. Now you will be served with a Notice Of Sale which simply states that your property will be put up for auction, it will include the sheriff’s auction date.
As you can see bank foreclosed homes for sale go through quite a process before being auctioned. Buying foreclosed properties can be a lucrativeve business or a great way to purchase a home. Foreclosed properties come as is so if you can have an inspection done ahead of time it’s highly advisable.
In future articles we’ll be providing information on taking advantage of bank foreclosure sales, tips on stopping foreclosures, tips on buying foreclosures and more. Buying a bank foreclosed home is a great way to get a bargain on your first home, upgrade to a house they may have previously been unobtainable or building a real estate business via the rental market. Remember bank owned foreclosed homes represent a good opportunity but you still need to due you homework into the condition of the property, there are many websites that list free foreclosure listings and allow you to bid online for the property, personally I wouldn’t purchase any property without inspecting it or having a company I trusted inspect it ahead of time. There are many things that can be wrong with the property.
I recently traveled to Florida with the hopes of picking up a vacation property for a song, there are many advertisements and courses promoting this type of investment, what I found was that there are so many homes in foreclosure in Florida, California, Arizona and Nevada (just to name a few) that the banks can’t keep up with proper upkeep on the properties. Many have been looted by thieves, particularly of things like air conditioning units etc as well as unkeep yards, pools etc. Another large problem is the construction boom before the housing crisis led to contractors using inferior products such as drywall imported from China which is actually omitting toxic fumes that are even starting to rot the copper piping inside the walls, this will be a huge expense and may render the property inhabitable. Do your homework, that bargain may not be such a bargain.
