foreclosure how does it work
How exactly do foreclosures work?
So i see adds all the time about Stop Renting Get you’re foreclosed home now kinda stuff but I’m wondering if it is just like renting and if its more expensive anything that can teach me a little bit about foreclousures would be helpful.
No. Getting a foreclosure is not like renting. Getting a foreclosure is like buying a home.
A foreclosure is when someone owns a home, but they fail to make payments to the bank. The bank then forecloses, meaning it becomes the new owner. At some point, the bank then decides to sell the house (because banks aren’t in the business of being landlords; they’re in the business of lending money). The bank lists the home with a Realtor.
In today’s market, Realtors are selling “normal” homes–ones that the owners are current in payments with, “short sales”–ones where the owners are falling behind and owe more than the house is worth, and “foreclosures”–ones owned by banks.
There’s a misconception that foreclosures are great bargains. Sometimes they are. Often, they’re not. Banks aren’t that dumb. Before they list a house for sale, they do the same thing most owners do. They get an estimate (in their case called a BPO) of what the house is worth. Then they’ll usually list it for about that price. And if it doesn’t sell in 30-60 days, they’ll usually drop the price…just like any other seller might.
So when you buy a foreclosure, you’re buying just like you would with any other property. You make an offer on the property. You go out and get a mortgage.
In some areas of the country, the monthly payments on a foreclosure might be less than rent. In other areas, it’s more. Example: In Manassas, Virginia, you can buy a foreclosed townhouse for $90,000. The monthly payments would be roughly $600 if you’re an owner-occupant and maybe $800 if you’re an investor. Rents in those areas are going for $1,100-$1,200. So, yes, that’s cheaper than renting. On the other hand, in Falls Church, Virginia, you might buy a foreclosed home for $400,000, so your monthly payments would be $2,500 a month. But you could probably rent the same home for $1,900 a month. So in that case renting is more expensive.
Check with a Realtor for more information.
