A foreclosure can be a nightmare for a homeowner and a dream for a home buyer. While there was some respite for homeowners during the 2019 pandemic, the early months of 2022 showed an increase in foreclosure, with over 20,000 homes being foreclosed in the first six months. With the rise in foreclosure activity, people need to learn more about foreclosure and what it means for the real estate industry. Read here to learn all you need to know about foreclosure and how it can affect the real estate market.
What is Foreclosure?
With more than 64.8% of mortgage homes in the US, not every homeowner can make payments on time. When that happens, the lender takes possession of the real estate, also known as foreclosure. The lender will then sell that house at a lower price than it is worth to reclaim its investment.
Depending on the state you live in, foreclosure can either be a judicial or a non-judicial process. A judicial foreclosure requires authentication from a court judge where the lender first files a lawsuit. Non-judicial foreclosure is quicker as it does not need a judge to authorize it.
All You Need to Know About the Foreclosure Process
The foreclosure process starts when the homeowner cannot make payments for three to six months. However, some lenders can have a shorter period. The homeowner is given a grace period of around a month or less to pay their mortgage, but if they can do so, they are considered a default, and the process officially starts.
Lawsuit and Notice of Default
If you have a judicial foreclosure, the lender will file a lawsuit for foreclosure. Not responding to the lawsuit lead to the judge will give a default judgment. If you respond, the case moves on to trial for summary judgment.
For a non-judicial foreclosure, the lender has the power of sale and issues you a notice of default (NOD). Then notice informs you about your debt, including late fees and additional costs. The homeowner then has 90 days to repay what they owe, and the process moves on to pre-foreclosure.
Pre-Foreclosure
The pre-foreclosure is when the buyer can stop the foreclosure by paying what they owe. Since the homeowner still possesses the house, they can choose to sell it. This is before the property goes on a short sale, where the lender typically sells the property to reclaim as much of the debt as possible. The house is sold for less than what it usually would be worth.
You are given a notice of sale if you can not pay the lender back or sell the real estate.
Notice of Sale
The notice of sale announces to the local market, either through a newspaper or through your property, that you no longer own the property, and the rights are shifted to the lender. The lender then prepares to put the house up for auction or a direct sale to recover its investment.
Notice of Leave
Once the home is sold, you will have to move out. Depending on your state, you have different timelines for when you have to move out.
All You Need to Know About Foreclosures Sale
A foreclosed home gives you many opportunities if you plan to buy a home. One of the most significant advantages of a foreclosed home is the price, which is lower than what the property is worth. Moreover, foreclosed homes offer a good investment opportunity. However, finding a foreclosed home is challenging, and your approach to buying one can differ based on the sale type. Read below to find out all you need to know about foreclosures sale.
Pre-Foreclosure Sales
Pre-forclosure sales are typically listed on courthouse buildings and online platforms. A pre-foreclosure sale usually occurs before the auction. While you might have to pay more in pre-foreclosure sales than in other types, it also means that there is less competition.
Short Sales
A short sale occurs when the lender is willing to accept less than what the outstanding mortgage is. This implies that the home is likely worth less than the mortgage, and the lender is cutting their losses by getting as much as possible for it. However, short sales can take several months, as it involves pending approval from the bank.
Auction
Once the borrower gets the notice of default, the foreclosed property goes on auction. These auctions either take place at an auction site, typically on the steps of the city’s courthouse, or online and are helpful for the lender to get quick money for their loan. As with any auction, the property goes to the highest bidder.
Bank Owned
Properties that could not sell at auctions return to the bank and become real estate-owned properties. The bank then sells these properties through an REO department of a real estate agent.
Government Owned
Since the Federal Housing Administration (FHA) guarantees some mortgages, thee government claims these properties and sells them through a federal agents after foreclosure.
Should You Buy a Foreclosed Home?
As with anything else, foreclosed homes have specific pros and cons. Read below to find out all you need to know about foreclosures and whether you should buy a foreclosed home.
Pros of Buying a Foreclosed Home
- The price is lower than what the house is worth.
- The closing process is quicker than for regular homes
- Foreclosed homes offer a great investment opportunity
Cons of Buying a Foreclosed Home
- You get the property “as-is,” which means there were no repairs.
- There is much competition for a foreclosed home.
- You must get pre-approval unless you pay out of pocket
- The cost of repairing and renovating might be expensive.
- Requires more paperwork than a regular home-buying process.
Get Help Buying a Foreclosed Home
Now that you are aware of everything you need to know about foreclosures, you can use a helping hand that can ensure that you can buy a foreclosed home. Robert DeFalco Realty has trained real estate agents with the necessary knowledge, expertise, and contacts to help you get a foreclosed home. Moreover, they are familiar with the foreclosed real estate industry and can ensure you get the best deal.
Contact Robert DeFalco Realty at 718-987-7900 or visit their office in New York. You can also fill out an online form and have a real estate agent get back to you.
