foreclosure remax

What is a pre-foreclosed house?

I am looking at buying my first house and I was told that bank owned and forclosed houses can be really cheap. I went to Remax.com and saw some houses under the status pre-foreclosure…what does that mean? The price on their website was 73K for a large nice house. Does that price stay the same? How would I go about buying a pre-foreclosed/foreclosed/bank owned house?

Hi A88,

The term pre-foreclosure USUALLY means that the owner/seller is behind on either mortgage or tax payments and foreclosure is imminent. Many times they will try a short sale which is simply asking the mortgage company/bank to take a lower payoff if the home is sold. Ex: Seller owes $150,000 but sells for $100,000 on short sale with bank permission. The $50,000 is put on their credit much like a foreclosure, but usually a smaller amount and an explanation is easily given like; “The market went down and this was all I could sell for.” This does not excuse the short sale or delinquencies and getting a mortgage will probably be difficult, but at least the pressure is off.

There are a few pitfalls for buyers to be aware of when purchasing properties on foreclosure, short sale, bank owned etc.
1. First and foremost is the time factor. I personally worked on a short sale that took almost 14 months to complete! The buyer and seller stayed in contract for that long while the banks went back and forth as to what they (there was a first and second mortgage) would accept. If you don’t have the time or patience to wait these might not be good deals for you.
2. Banks are requiring that the buyers pre-qualify with that institution. Ex: a Wells Fargo foreclosure or short sale may require the buyer to pre-qualify with Wells Fargo. If your credit is marginal and every point counts and you have already qualified for a loan with ABC Mortgage another credit pull from Wells Fargo may put you under the minimum. You need to check with your lender before doing this.
3. There may be fees associated with the closing that you are unaware of. For instance if the seller didn’t pay their taxes for 2 years and that amount is $10,000 you may have to pay it at closing. If the seller has no proceeds from the sale YOU may have to pay what they owe in delinquencies. In my experience if an owner isn’t paying their mortgage there are usually other things they aren’t paying.
4. BUYER BEWARE. When you purchase a foreclosure you are usually buying as-is. This means that the seller will perform no repairs what so ever. No matter the condition, cost of repairs, or value of the property. Just because the property LOOKS good to you and you like the price, get the property inspected by a licensed property inspector. The amount it will cost you (usually a few hundred dollars) could potentially save you thousands of dollars allot of time and some sleepless nights. I advise all my clients to get a home inspection and have them sign a piece of paper stating that I advised them. If they do not get an inspection I have them sign a piece of paper stating that they are doing this against the advice of their agent. No matter the circumstances. Yes it’s that important

Don’t let this scare you away from these types of properties. I help buyer with them all the time. Sometimes they go very smoothly and you CAN get a great deal. There are properties that are selling for hundreds of thousands below true value.

The most important thing is to work with a Realtor in the area you are buying in who is very well versed in this type of purchase. Ask for references. I know exactly who to call at various banks and lending institutions to get what is necessary to close the deal. I also know what questions to ask. Which can save everyone involved allot of heartache and hassle.

I hope this helped. Good luck and have a great holiday weekend.

foreclosure remax