Foreclosure Home Deals Are Not Easy Snap-Ups

It seems that nothing could be easier than buying a foreclosure home and walking in with bedding, pots and pans. But the reality is a far cry. The main reason is that the buyers have too high expectations, which clashes with the reality of not-so-low prices. Then come the overwhelming repairs.

Lenders are generally large corporate bodies – far from the houses being sold and can afford to hang on it. Some cling on so as not to avoid reporting a loss. There are others with properties in prime areas like Washington where the foreclosure crisis is not quite so intent. The lender can afford to play a game of wait and watch with hope. Here there are 16 foreclosures per 10,000 units as compared to the national average of 37. In places like Detroit, Las Vegas and Atlanta the number is more than 100. When are lenders eager to sell? When there are more foreclosed units entering than exiting.

In an auction the lender starts with the minimum bid that covers the loan that had been lent out. Rarely it is less. There are extra costs that have to be covered – eviction, cleaning, re-locking and paying agent’s commissions. The lenders are a harassed lot and would rather others took on their headache. Investors are usually more than willing.

There are many pitfalls. The homes up for auction may still be occupied which means that neither the potential buyer nor the appraiser can properly assess the condition. Then it requires a hefty deposit to qualify for bidding – 10% of the opening bid. It is not all smooth sailing after that. The unit can be snatched away from the winner at the last minute if the owner sells the home by refinancing or files for bankruptcy. Even without this there are inordinate delays in some counties before the courts give the final stamp of ratification. A foreclosure is not the best bet for those who want to build a home in the house.

Foreclosure proceedings are initiated when the borrower fails three mortgage payments. The property is auctioned where the lender opens the bid with the figure due to him or her. If more money comes in, the surplus goes to the borrower. If the auction fails then the house goes to the lender who is free to have it sold via an auction house or agent.

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