Entering the Foreclosure Market? – You Need to Know These Definitions and Procedures.
Q: What is a foreclosure?
In technical terms, a foreclosure is defined as a legal process by which a mortgagor (usually the owner) of real property is deprived of his interest in that property due to failure to comply with terms and conditions of the mortgage. In other words – the owner didn’t pay the mortgage, so the bank, lender, or investor needs to sell the property to recoup its money.
In technical terms, a foreclosure is defined as a legal process by which a mortgagor (usually the owner) of real property is deprived of his interest in that property due to failure to comply with terms and conditions of the mortgage. In other words – the owner didn’t pay the mortgage, so the bank, lender, or investor needs to sell the property to recoup its money.
Q: Can a first time homebuyer buy a foreclosure?
Yes. There are some great advantages to a first time home buyer – price is usually lower, the seller is motivated to sell fast, and the home is empty and ready for immediate occupancy.
Disadvantages may include back taxes in appears (unpaid), home needs maintenance (people who foreclose don’t usually have money for maintenance), and there may not be a warranty. Don’t expect a “dream home” and you won’t be disappointed - though deals are out there.
Q: Can I buy a foreclosure at an auction?
Yes. There are some rules to follow, but it is possible to get an auctioned home. Many are auctioned on the courthouse steps in the local jurisdiction. The public is invited and notices are placed in local newspapers prior to the event. As per a typical auction, highest bidder wins.
Remember that at an auction, the home is sold “as-is” (no warranty) and you usually need up to 10% down to secure the property, then a certain number of days (5 to 30 or more) to come up with the balance of the money. Here is where a pre-approval is an absolute necessity – you need to know how much you can borrow BEFORE you go to the auction.
You might find a bidding war does not work to your advantage. We work with realtors, as well, that can guide you to the property BEFORE it goes to auction.
Q: Can I get a conventional loan to finance a foreclosed home?
Yes – depending upon your credit and the mortgage size – just like any other property. Sometimes there are situations where additional money can be borrowed to repair the home, and sometimes lenders can “roll” the money into the loan.
If you improve the property to “green” standards – which are energy-efficient standards that are certified by Energy Star® (an EPA certifier) – you can qualify for improvements and more easily in most cases. We at Capital Mortgage Advisors are an Energy Star® lender partner and can get you a “Green Mortgage”. It requires work, but can be a valuable tool for financing and save you money on energy costs if you intend to occupy the home.
Q: I’ve heard of REO property –what’s that?
Many TV investment gurus – working the late night market - tout these as easy marks. Perhaps. REO stands for Real Estate Owned, often called “REO by Bank”. These are bank-owned homes that the previous owner defaulted on. Banks don’t want real estate – they want money (CDs, checking and savings accounts, T-bills, and the like). When banks have a property that is now their responsibility it ties up their investment capital and makes for a nervous boardroom.
Buying REO foreclosures can mean working with the bank, however almost all have realtors who handle their REO properties. While the banks want to rid themselves of REOs, don’t expect them to give away their money. Going with a mortgage broker or mortgage banker – such a Capital Mortgage Advisors – for your financing pre-approval keeps you in control. You don’t need the bank's money or approval, so you can negotiate through your realtor – aggressively!
Q: What is a commercial foreclosure?
Businesses can run into financial problems just as easily as individuals. When a business is delinquent on their payments and the loan falls far enough into arrears, the lender will foreclose on the property. This is a commercial foreclosure and the results – sale or auction – are the same. The property is the difference – multi-unit (more than four) apartment building, condos, office buildings, and so on. These properties are for the seasoned pros.
Q: What happens if I find a foreclosure I like?
Then what?You need to talk to us or fill out an application through our home page (look on top). You need to be pre-approved before putting in an offer. We’ll guide you through the process – whether you’re a first time home buyer or a seasoned investment veteran. We have many loan programs from a multitude of sources – one or more should fit you nicely.
Q: Is there a government site for foreclosure information?
Yes. It’s http://www.hud.gof/ and is a bit rough to navigate. This site lists HUD foreclosures and can be a good house-hunting tool. You can also work with us – Capital Mortgage Advisors - and our affiliated realtors – they will save you time and know the market. Remember, you need to be completely pre-approved before you can place a contract or bid on a HUD-foreclosed home.
Capital Mortgage Advisors has relationships with realtors and lenders to get the mortgage you need. Feel free to contact us with any questions at foreclosures@yourhome-yourmoney.com and Bill and Art will make certain your questions are answered.
You can also start the ball rolling by beginning your pre-approval on our ultra-secure homepage where it says “Loan Application” or by beginning below. In the foreclosure game, you won't find better teammates than the Capital Mortgage Advisors.
Thanks and good luck.
Bill Quigley
Art Blanchet
The Mortgage Experts
Listen to "Your Home - Your Money" each Saturday morning at 9 o'clock on Madison 1670 - the Pulse. Relevant financial talk - presented LIVE radio - co-hosted by Bill Quigley and Art Blanchet, your Madison Area Mortgage Experts.
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