Foreclosure Sales 

There are three different types of foreclosure sales: pre-foreclosure sales, foreclosure auctions, and real estate owned sales. A pre-foreclosure sale takes place when the property owner sells the property privately after the foreclosure process has begun, but before the property has actually gone into foreclosure. This is where most beginners will have the best experience getting involved with foreclosure sales. Typically, the owner will be willing to sell the property below its appraised value, because he or she is under duress and wants to pay off the mortgage, avoid the foreclosure process, and prevent damage to his or her credit rating. Experts suggest that buyers not pay more than 70% of the appraised property value in a pre-foreclosure sale, although in a tight real estate market, one may have to pay more than this amount.

One advantage of pre-foreclosure sales is that the prospective buyer will have the opportunity to inspect the property prior to the purchase. The difficult part of these sales will be the negotiation with the seller and the fact that there will often be time pressures to complete the transaction before the foreclosure sale takes place. You may want to have an attorney or other experienced professional, such as Sage Allen Real Estate help you negotiate the sales contract. The best way to improve your negotiating position is to have pre-approved financing in place when you enter into negotiations. Another possible advantage to having pre-approved financing in place is that this may allow the buyer to simply take over the seller's existing mortgage and pay whatever is necessary to bring the loan up to date.

Finally, it is important to establish a good relationship with the seller. This can be difficult, because often the seller is very disturbed because of the process and the time constraints. This may make the seller difficult to deal with. Being patient and understanding the situation can help smooth this process. Also, making the seller feel that he or she is also getting a good deal can be helpful.

The key to success in these types of transactions is to know exactly what deal you are entering into and what you can expect to have to spend. If you are getting a below-market deal and you believe that the additional hassles of this type of transaction do not outweigh the cost savings, then this is likely a good deal.

Foreclosure auctions are the next type of foreclosure sales. These are the riskiest type of foreclosure sales for novices to get involved with, as many of the participants at the auctions are savvy professional investors who make their living through purchasing property at auctions. Attempting to compete with these individuals can be very difficult for someone who is not properly prepared. Often the lender will also participate in the auction as well, in order to prevent the property from selling for a low price that would cause the lender to lose money. Approximately eighty percent of auctions end with the lender retaining the property.

Another problem is that you may not be able to inspect the property before the auction, and you will typically be required to pay the full auction price within a short period of time. You may also have to evict any tenants that remain in the property after the auction. This can be a messy process. You will also be required to pay for the property with a certified check or cash.

If you do wish to get involved with foreclosure auctions, you should be well-prepared in advance. It would be a good idea to make certain that you fully understand how the process works, and you should also sit in on one or more similar auctions beforehand to help you become comfortable with the process. At the time of the auction, you should make sure that you have any necessary financing in place, and then determine your maximum bid, and do not go over that amount. It is probably best for inexperienced individuals to avoid these types of sales, unless one is very well prepared by taking the steps explained above. It is also important to know that about half of all properties at foreclosure auctions are never actually sold at the auction, as the original owner works out some way to keep the property. This can be very frustrating if one has spent a great deal of time and effort preparing to buy a certain property.

The final type of foreclosure sales are real estate owned sales. These are the easiest and least risky types of transactions, but they also offer the least potential reward. These are properties that have already completed the foreclosure process and are now owned by the bank or other lending institution. These properties will usually be sold free and clear of any encumbrances, as the bank will pay these to sell the property with a clear title. These properties will sometimes have necessary repairs made before they are sold, although this is not always the case. Because these properties are usually sold "as is", it is important to know if there are any repairs necessary.

In essence, this type of transaction is very similar to the typical real estate transaction one would expect for any real estate that is not in the foreclosure process. The advantage of this is that the buyer has more time to secure financing and inspect the property. The disadvantage is that this type of transaction does not offer a significant savings as compared to a traditional real estate transaction.

Another option available is to purchase a HUD (Federal Housing and Urban Development) home, which will be available after the foreclosure of the HUD or FHA (Federal Housing Authority) mortgage. This is similar to purchasing a home at a real estate owned sale. The advantage is that HUD will pay a small amount of the closing costs, and if the property has been pre-approved for an FHA mortgage, it will already have been appraised, which will help expedite the sales process.

In conclusion, buying a foreclosure property can be an excellent way to save money on the purchase of a home or property, but it is not without risks. The key to success is to be very well prepared and be sure that you completely understand the process and applicable laws in your area. For most first-time foreclosure buyers, buying a pre-foreclosure property will offer the best opportunities of saving a significant amount of money without undue risk. Purchasing property at a foreclosure auction is far more risky, and is best left to professionals who are well-acquainted with how the process works. Buying a real estate owned property is very similar to purchasing property through a conventional real estate sale, and usually offers little savings over a conventional sale

For additional information on foreclosures call us directly at our toll-free line 888-253-4627.