Foreclosures

Foreclosures

Do you have to buy HUD homes through a realty agent?

You can only purchase a U.S. Department of Housing and Urban Development property through a licensed real estate broker. HUD will pay the broker’s commission up to 6 percent of the sales price.

Are foreclosures an option?

A foreclosure property is when a lender repossess a home. This is due to the owners failing to pay the mortgage. Thousands of homes end up in foreclosure every year. Economic conditions affect the number of foreclosures, too. Many people lose their homes due to job loss, credit problems or unexpected expenses. It is wise to be cautious when considering a foreclosure. Many experts, in fact, advise inexperienced buyers to hire an expert to take them through the process. It is important to inspect the house thoroughly. Also, be sure that any liens, undisclosed mortgages or court judgments are cleared or at least disclosed.

What types of foreclosure are there?

Judicial foreclosure action is a when a mortgagee, a trustee or another lien-holder requests a court-supervised sale of the property. This is to cover the unpaid balance of a delinquent debt. Nonjudicial foreclosure is the process of selling real property under a power of sale in a mortgage or deed of trust. In such a foreclosure, the lender is unable to obtain a deficiency judgment. This makes some title insurance companies reluctant to issue a policy.

How do you find government-repossessed homes?

The U.S. Department of Housing and Urban Development acquires properties from lenders who foreclose on mortgages insured by HUD. These properties are available for sale to both homeowner-occupants and investors. You can only purchase HUD-owned properties through a licensed real estate broker. HUD will pay the broker’s commission up to 6 percent of the sales price. Down payments vary depending on whether the property is eligible for FHA insurance. If not, payments range from the conventional market’s 5 to 20 percent. One caution, HUD homes are sold “as is”. This means limited repairs have been done, but does not imply structural or mechanical warranties.

Can I get a HUD home for as little as $100 down?

If you are looking for a bargain, you may be able to buy a foreclosure property acquired by the U.S. Department of Housing and Urban Development for as little as $100 down. With HUD foreclosures, down payments vary depending on whether the property is eligible for FHA insurance. If not, payments range from 5 to 20 percent. When the property has FHA-insurance, the down payment can go much lower. Each offer must be accompanied by an “earnest money” deposit equal to 5 percent of the bid price. This is not to exceed $2,000 but not less than $500.

The U.S. Department of Veterans Affairs also offers foreclosure properties which can be purchased directly from the VA. They are often well below market value with a down payment amount as low as 2 percent for owner-occupants. Investors may be required to pay up to 10 percent of the purchase price as a down payment. This is because the VA guarantees home loans often ends up owning the property if the veteran defaults.

If you are interested in purchasing a VA foreclosure, call 800.827.1000 to request a current listing. About 100 new properties are listed every two weeks. You should be aware that foreclosure properties are sold “as is”. This means limited repairs have been made but no structural or mechanical warranties are implied.

Where can you find foreclosures?

In most states, a foreclosure notice must be published in the legal notices section of a local newspaper where the property is located or in the nearest city. Also, foreclosure notices are posted on the property itself and somewhere in the city where the sale will take place. When a homeowner is late on three payments, the bank will record a notice of default against the property. When the owner fails to pay up, a trustee sale is held. Then the property is sold to the highest bidder. The financial institution that has initiated foreclosure proceedings usually will set the bid price at the loan amount. Despite these seemingly straightforward rules, buying foreclosures is not as easy as it may sound. Sophisticated investors use the technique so novices may find themselves among stiff competition.

What happens at a trustee sale?

Trustee sales are advertised in advance and require an all-cash bid. Usually a sheriff, a constable or lawyer acting as trustee will conduct the sale. This kind of sale, which usually attracts savvy investors, is not for the novice. In a trustee sale, the lender starts the bidding at the amount of the loan on the foreclosure. Successful bidders receive a trustee’s deed.

Where do I learn about HUD foreclosures?

One good source is their Web page https://www.hud.gov.

What are problems buying foreclosures?

Buying directly at a legal foreclosure sale is risky and dangerous. The process has many disadvantages. There is no financing; you need cash and lots of it. The title needs to be checked before the purchase or the buyer could buy a seriously deficient title. The property’s condition is not known and an interior inspection is not possible before the sale according to James I. Wiedemer, author of “The Smart Money Guide Bargain Homes, How to Find and Buy Foreclosures”. In addition, only estate (probate) and foreclosure sales are exempt from some states disclosure laws. In both cases, the law protects the seller, who acquired the property through adverse circumstances and has little or no information about it.

What about buying a foreclosure “as is”?

Buying a foreclosure property can be risky, especially for the novice. Usually, you buy a foreclosure property as is. This means there is no warranty implied for the condition of the property. In other words, you can’t go back to the seller for repairs. The condition of foreclosure properties is usually not known because an inspection of the interior of the house is not possible before the sale. In addition, there may be problems with the title, though that is something you can check out before the purchase.

How do you get financing for a foreclosure?

One reason there are few bidders at foreclosure sales is that it is next to impossible to get financing. You generally need to show up with lots of it cash or a line of credit with your bank upon which you can draw cashier’s checks.

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