Have you or any of your acquaintance ever taken loan? So, you must have noticed while exchanging money, you stake your sweet home by making a promise that if you could not able to pay them back they could take your home. Here, your sweet home is a foreclosure property.
Foreclosure investing is, likewise, a legalized procedure which involves the acquisition of your house i.e. the mortgaged property, which was being impounded by the lender due to non-fulfillment of mortgage obligations by the owner. In short, the owner forfeits all the rights against his/her property. It all causes to happen when the owner (borrower) fails to make the timely mortgage payment. The investor or bidder buys the foreclosed property with the intent of having a price below market value.
Stages of foreclosures:
Indeed, the stages in foreclosure property is a compound set of steps that variegate from state to state. However, more or less, below is the general description of the process involved in foreclosure property.
1. Fail to make payment: The lenders, in most cases, are bound to initiate the foreclosure process or can charge additional late fees, in case the owner fails to make the mortgage payment before the expiration of the deadline.
2. Notice of Default: The issuance of a notice of default is typically made in the interest of borrower from the lender if owner past due on their mortgage for more than one month. The lender specifies the period of time for the owner to pay the remaining amount which was past due.
3. Pre-foreclosure: This is basically the grace period where borrower left no stone unturned to make arrangements for the payment of default amount.
4. The legal foreclosure process, i.e., Auction: Now this step is where a bank begins action in the court system to foreclose if the borrower failed to pay the amount he has defaulted by the deadline. This is the period where legal notices about the foreclosure property started publishing in local newspapers and advertisements. Eventually, the foreclosed property will get sold at the auction to the highest bidder.
Pros of buying a foreclosed property
· Who will deny buying a furnished property at a price comparatively lower than the market price? Almost no one. Nobody will let go such a golden chance of getting a secured investment which is free from all lawsuits and with authentic legal documents.
· You can also flip the property to resell it for the profit. Now, you are the exclusive owner of the very property. You possessed all the rights to sell it anytime, anywhere and anybody.
· The seller, in some cases, is responsible for the repairs and maintenance.
Cons of buying a foreclosure property
· You are given with the short notice to arrange funds if you are allotted with the foreclosed property. In case if you are getting a loan from the bank, still, you must ensure that you will receive the loan before the auction takes place.
· The most pertinent problem faced by the bidder is the problem of non-disclosure. Most of the times, the owner of the foreclosed property is a bank and they are not aware of the issues pertaining to the foreclosed property. The potential bidder has to do his/her own introspection post-purchase.
Is it safe to buy the foreclosure property?
Since it is different from a resale property, buyers need to introspect it thoroughly, its pitfalls and repercussions, in order to avoid potential menace. Before taking such a big step, you must have backed your decision with a legal advisor. Taking arbitrary decisions without legal consultancy, many a time, lead to a terrible game. One can do market research, spend time visiting more auctions and get a feel of the market in order to avoid potential bedlam.