Guide for Investing in Foreclosure Homes

Navigating the foreclosure homes market for the first time can at first seem a little daunting. If your only experience with buying real estate has been through an agent, or you've never bought real estate before, there's a lot to consider. But buying a foreclosure is actually a lot simpler than buying through an agent. There is much less red tape, less bargaining, and the ease of dealing without a middle man can make the entire experience a lot more worthwhile. Foreclosures can be broken down into three simple categories: auction homes, pre-foreclosures, and bank and government owned properties. We'll explain them all here.

Auction homes are the most common, straightforward and typical type of home foreclosures out there. They begin the same way all foreclosures begin, with a homeowner default on their mortgage loan payments. When a homeowner defaults, the lender will have no choice but to attempt to sell the property in question in order to regain the delinquent loan, and the law provides in most cases that this should happen through a public foreclosure auction. Basically, once a lender informs a lender of their intent to foreclose, they set a date for a public auction sometime in the future. The homeowner has until that time to pay off their default debt and retain their ownership. If they do not, the property will be auctioned off to the public. Anyone can bid at auction, and often times, properties will go for anywhere from 20-50% below what they are actually worth, both because the lender only needs to collect a portion of the home's value to satisfy the debt, and because the lender wants ti encourage a sale. This is the easiest and most accessible type of foreclosure sale, especially for beginners.

A pre-foreclosure is a home that is sold by the defaulted homeowner before an auction takes place. This allows the homeowner to avoid a credit-ruining foreclosure, and can also be a great chance for a buyer to work out a mutually beneficial agreement that can get them a great price on a property, and help out a homeowner in need. While this does take more initiative on the part of the buyer to get in touch with defaulted homeowners, the payoffs can be huge.

Bank foreclosures or government foreclosures are real estate that either went to foreclosure auction and didn't sell, or was handed directly into the possession of a bank or government lender. Buying a foreclosure home involves getting in touch with local banks or housing agencies like HUD or the VA department to find listings. This can be a more straightforward, traditional process, but can still yield some great values for the buyer.

MostlyForeclosures.com can help you learn more about the different types of homes in foreclosure and pick the one best suited to your needs and comfort level. Visit us today and learn more about what's out there and search listings right in your area!

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