Understanding the Foreclosure Process
Having had my real estate license for over twenty three years, I don’t remember a time when I have seen so many short sales and foreclosed homes on the market. It is very clear that the economy has made a negative impact on the real estate market.
But all is not lost. New buyers have flooded the market due to declining home values and affordability for the first time in many years. This has resulted in an up tick of sales in the spring market which is quite an improvement from last year.
I have questioned exactly why home owners are losing their homes. Could it be because they have lost their jobs? Have they over extended themselves with debt and can’t hold onto their homes anymore? Do people feel that because they are “under water” with their home and don’t feel that it is worth paying for anymore? I feel that it is a little of all of these reasons. That is what leads me to this month’s topic….understanding the foreclosure process.
Foreclosures affect all of us. You may have a neighbor who is losing their home through foreclosure. Unfortunately this will also have an affect on your home value too.
Foreclosure is not the most cheerful thing to think about, but it is an element of reality every homeowner should be aware of and comprehend fully.
We fear what we don’t understand. The concept of foreclosure is frequently misunderstood. Understanding the concept of foreclosure maximizes your ability to take action to improve your situation.
What is Foreclosure?
Foreclosure is a legal process which culminates in a mortgage lender selling or repossessing the home of a borrower who stopped making mortgage payments.
It starts with a series of events that begins when a homeowner defaults or stops making his or her payments. This usually happens because of a life crisis which impacts their income or because their loan payments increased beyond their ability to pay them. The series of events ends when the mortgage holder sells the home at auction, or takes the home back from the owner.
How it affects homeowners
Foreclosure starts when you are at least 90 days behind on your mortgage payment. Then, the foreclosure process is represented by a series of notices you get in the mail and even posted on your front door over a 4 to 6 month period of time telling you that you have two options ….either make your past due mortgage current or come to some compromise with the lender or your home will be sold and you will have to move out. At the end of these notices the lender could sell your home at an auction or simply takes ownership of it and you our out. Most of the foreclosures are showing up on the multiple listing services as banks are so overwhelmed that they are using local realtors to move the properties. Your options, rights and responsibilities change depending on what phase or stage of the foreclosure process your home is in at any given moment.
How it affects home buyers
Foreclosure is a series of phases of distressed property ownership. During your house hunt, there is a very good chance that you may run into properties whose current ownership status is in foreclosure. Once a home has reached this step it presents a different set of considerations, legally, logistically and from a bargaining perspective, impacting how desirable a property may be to you as a buyer. Most foreclosed homes are usually in need of a lot of work. It’s not very often that you will find an updated property.
Post foreclosure properties – REO
REO means Real Estate Owned. This is just another name for a bank owned property that has gone to foreclosure.
The advantage to buying one of these properties is that the bank is motivated to get the property sold and will negotiate price, down payment, escrow and closing costs.
The title will be clear and the buyer will not take on any liens, back taxes of prior owners.
Inspections and mortgage financing are allowed within the normal due diligence period.
The house will be vacant and in the majority of times it will be listed on the local Multiple listing system. Most REO properties close within a normal escrow period time.
The disadvantages are that the banks will not do any repairs and you will purchase the property as-is. The bank does not provide property condition disclosures. When buying an REO property you will be subject to a large amount of bank paperwork.
There are REO homes on the market that don’t qualify for a conventional mortgage because they need total rehab. These homes, which are sometimes the best buys, usually require cash to acquire them. Local builders and investors are doing just this and refurbishing the homes to their former splendor.
Please contact me to learn more and recieve foreclosure listings.
Betty Bondi
203-899-9990