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How to Buy Foreclosures

Buying a Pre-foreclosure (NOD, LIS)

A pre-foreclosure occurs after a homeowner has defaulted on their property, but before it has been sold at auction. You negotiate with the owner of the property before it is sold at the auction, and you take on the mortgage and any other outstanding debts on the property. The pre-foreclosure period can go on for several months, so it may require time and patience to contact the owner in default. Once you find a property you are interested in, it is important to make sure the property is still in foreclosure. You can find this information out by calling the trustee or attorney indicated on the listing. The trustee or attorney will let you know if the property has been reinstated or sold but that is all they will tell you. They will not respond to other questions regarding the property.

If the property is still in foreclosure, do your due diligence. Check for additional loans and liens and market value. Drive by the property to get a better idea of its condition and neighborhood and figure out if this property is a good value and fit for you. Next, you should contact the owner by either sending a letter expressing your interest in the property or by calling the owner . Try to arrange a meeting to get a look at the property and discuss a potential sale.

If you make a deal with the homeowner you'll be responsible for making up the back payments owed to the lender, as well as any accrued foreclosure costs. Contact the lender and try and negotiate a deal with them.

Once all parties have arrived at an agreement, put the agreement in writing. If you're not familiar with how to draw up a purchase agreement, ask a local real estate agent or real estate attorney

Buying at Auction

Before the auction is a good time to contact the owner and try to work out a deal. Auctions can be delayed or cancelled at anytime so it is always a good idea to reach out to the trustee or attorney indicated on the listing page to confirm the date, time and place of the auction. Always double check this information the day before the scheduled auction.

A foreclosure sale is done through a court auction process where the highest bidder wins title of the property. You should do your due diligence before the auction date. Check for additional loans and liens and market value and figure out if this property is a good value and

fit for you. Most auctions are at a public place in the same county where the property is located.

Depending on the state, you will be required to bring either the full amount you want to bid in the form of cash or cashier's check, or a certain percentage, usually 10 percent, of the bid amount in the form of cash or cashier's check and pay the remainder of the amount

within a certain time frame if they are the highest bidder. The opening bid at the auction is based on the total amount owed to the foreclosing lender and may include fees incurred because of the foreclosure proceedings. If no one bids above that amount, the foreclosing lender will take possession of the property.

The bidding procedure varies from state to state, so get informed about the procedure in your area before bidding at an auction. Go to a few auctions before hand and observe so you are familiar with the process.

If you are the winning bidder you must get documentation from the auctioneer to verify that you are the winning bidder. Find out what other steps are necessary before you take ownership of the property. In some states, ownership can be transferred immediately or within a few days. In other states, you may need to wait a month or more for the sale to be confirmed by a court. Some states have redemption periods for the owner, in which case the owner can buy the property back from you if they pay the full amount paid at the auction, plus applicable fees.

Buying REO (Real Estate Owned)

An REO (Real Estate Owned) is a property that goes back to the mortgage company after an unsuccessful foreclosure auction. The lender usually sells the property to recover the unpaid loan amount and typically clears the title for any buyer.

Make sure to do your due diligence. Check for additional loans and liens and market value. Drive by the property to get a better idea of its condition and neighborhood and figure out if this property is a good value and fit for you.

The purchase of a REO property is much different than conventional homes. Most REO properties are sold “as is,” with the seller making no repairs.

You still have the right and contingencies of inspections, but the bank isn’t likely to make any improvements to the property. It is extremely important to be pre-qualified or pre-approved by a financial institution before making an offer on a REO property. In most cases the

seller will not even respond to an offer without verification of your ability to procure financing. Contact the bank indicated on the listing if you are interested in purchasing an REO. It is also a good idea to use a realtor.