Jakemann Racing

The term “foreclosure” sometimes conjures up visions of buying a home at bargain prices of a few cents to the dollar. The real question you need to ask yourself is whether you are simply looking for something on the cheap or for a good deal on a suitable house. Whether a foreclosure is the right deal for you depends heavily on the specific circumstances.

A foreclosure is initiated by a mortgage lender when the house owner is delinquent on his debt payments. If he has been in financial trouble for some time, it is likely that he has neglected essential repairs and maintenance on the house. This may be a desirable factor if you simply want to “flip” the house in other words resell for a quick profit.

Otherwise any discounts on the price that you can obtain can easily be swallowed up by the cost of repairs required to make the house inhabitable. Also bear in mind that many lenders and banks are really aware of ruling property prices and are not desperate to get rid of the property at any cost.

You can acquire the property at auction but this is not to be recommended for many reasons for inexperienced foreclosure buyers.

Auctions often have onerous conditions on items like payment and inspection and are best left to the professionals. You can also negotiate directly with the bank or a lender but you are unlikely to get any real bargains unless the property in question is badly rundown or otherwise un-salable. Your best chance of getting a good deal is to make direct contact with the homeowner either before the foreclosure commences or before it is complete. You will need to be resourceful in trying to find potential sellers before foreclosure commences because this represents your best chance of a deal [you can for instance check at the court house to see what eviction notices have been issued].
Typically in these cases, in addition to the price of the house, you will probably be required to pay an agreed potion of the owner’s home equity in cash.

Here are some sensible precautions you should take before negotiating for a foreclosed property:

- You need to be sure that the homeowner is not entitled to stay on for a prolonged period after foreclosure

- consult a lawyer if necessary about redemption rights for the homeowner. This means that he has an irrevocable right to rectify his default after paying his debts is all associated costs and regain his property

- make sure you’re the type of person who has no misgivings about taking advantage of somebody else’s misfortune. Make no mistake this is not easy for an ordinary decent person.

- examine and the records to make sure that there are no lesions or
claims on the property as settling these will drive up the price.

As you can see, getting a good deal out of a foreclosure is not as easy as it seems and you may consider it wise to appoint a real estate agent who specializes in foreclosures.

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