| While foreclosed homes tend to be lumped into one | | | | through public auction. Some are sold at deep discount |
| type of property, there are in fact many types of | | | | and some are sold for nearly full market value. It is up |
| distressed property. Each has their own advantages | | | | to the buyer to do enough research to ensure that |
| and potential pitfalls for the buyer: | | | | they are getting a foreclosure deal and not a dud. |
| 1) HUD homes. HUD (The Department of Housing and | | | | 5) Pre-foreclosure homes. These foreclosed houses |
| Urban Development) homes are sold by the federal | | | | have not gone into foreclosure - yet. Usually, the |
| government. The last owner of an HUD home had a | | | | homeowner is facing a financial crisis and is willing to |
| government-insured loan. When the owner defaulted | | | | sell the home for less than full market value in order to |
| on this loan, the lender recouped the money lost on the | | | | avoid foreclosure. Pre-foreclosures vary widely. Some |
| loan via the government. The government is selling the | | | | offer a good discount while some homes have too |
| home. HUD homes are attractive because the HUD | | | | little equity to make a good bargain. It is up to the |
| offers many special programs for first-time and | | | | investor to put together a deal that is attractive to the |
| low-income homebuyers. If you qualify for one of the | | | | homeowner and a good business plan for the investor. |
| HUD's programs, you could enjoy substantial savings. | | | | 6) REO real estate. REO (Real Estate Owned) |
| HUD homes are also appealing because they can be | | | | properties are sold as foreclosures through a lender or |
| purchased through an HUD-approved real estate | | | | a lender's representative. Usually, REO homes have |
| agent, who can guide the buyer through the process. | | | | failed to sell at auction or were purchased by the |
| 2) VA homes. VA homes are being sold by the | | | | lender at auction. Usually, these homes do not offer a |
| Department of Veteran Affairs (VA). The last owner | | | | huge discount. In fact, some are priced at full market |
| of a VA home was a member of the army, navy, or | | | | value or even above. Still, some REO houses are a |
| another branch of the military. When this owner | | | | good bargain. One major advantage of buying an |
| defaulted on the mortgage, the VA paid for the default | | | | REO home is that title problems are usually taken care |
| amount and took possession of the property. Buying a | | | | of by the lender, so there is less risk buying this type |
| VA home means that you buy a home with some of | | | | of property. As well, some lenders are willing to offer |
| the same advantages as a member of the military. For | | | | great rates on loans for buyers of REO homes. |
| example, you may not have to pay mortgage | | | | 7) Distressed properties. "Distressed properties" is an |
| insurance on the property. | | | | umbrella term for any property that has some |
| 3) Tax sale homes. Tax sale homes are sold through | | | | disadvantage that may affect its asking price. For |
| public auction because the homeowner has failed to | | | | example, foreclosures are often called distressed |
| pay property taxes on the property. In many cases, | | | | properties, as are homes that need some repairs or |
| this type of foreclosure can be purchased for the | | | | renovations. |
| amount of outstanding taxes - which is often a small | | | | 8) FSBO homes. For Sale by Owner (FSBO) homes |
| fraction of the home's value. However, tax sales are | | | | are sometimes pre-foreclosure homes although they |
| very competitive and the price of these homes quickly | | | | can also be homes that are not at risk of foreclosure. |
| rises as bidders vie for the property. As well, tax sale | | | | Some FSBO properties are sold at below market |
| homes are sold with no warranties so that it is often | | | | value because the owner is motivated to sell and is |
| hard to tell whether there are major problems with the | | | | saving money on a real estate agent - a savings he or |
| home. | | | | she passes on to the buyer. |
| 4) Foreclosure homes. Foreclosure homes are sold | | | | |