| Although there is a lot of publicity surrounding the | | | | REO or Real Estate Owned properties. |
| foreclosure crisis in America, there is very little real or | | | | When the bank does not take back the property, it |
| useful information available to people who are | | | | becomes available for people to bid on starting at the |
| interested in trying to purchase a foreclosed property. | | | | upset price established by the bank. However, the |
| Radio and TV ads talk about buying a 4 bedroom | | | | home owner is often still residing in the property, |
| house for $14,000 and so forth. Obviously, it is not as | | | | making it impossible to get into the property to see it. |
| easy as all that. | | | | You are therefore buying the property without a |
| Foreclosure is a lengthy and painful process for the | | | | proper inspection. Plus, if you are successful in |
| home owner. There is usually ample time for the home | | | | obtaining the property, it will fall to you to evict the |
| owner to make everything right - and there has been | | | | former home owner and his family. If there are children |
| a concerted effort by the government to make | | | | involved, this can be an especially expensive and |
| mortgage modification possible. For example, the term | | | | lengthy process. |
| of the mortgage can be reset to make it longer, the | | | | Sheriff Sales typically require that you put down 10% |
| interest rate can be lowered, the principle can be | | | | of the purchase price on the day of the sale either in |
| reduced, the ARM can be converted into a | | | | cash or certified funds. You must then come up with |
| conventional, etc. All these things can make the | | | | the rest of the money in three weeks, so conventional |
| monthly payment lower and more affordable. | | | | financing is difficult. Also bear in mind that departing |
| However, this program has been met with limited | | | | home owners often do damage, sometimes a lot of |
| success. Banks are pretty much unwilling to give in and, | | | | damage, to the property. There is currently a bank |
| when they do, the borrowers often fall behind again | | | | owned property in my local MLS where the home |
| anyway. | | | | owner took the entire kitchen with them when they left |
| Foreclosure laws vary by state, but this is what | | | | from a 3-year old executive home. |
| typically happens: The home owner falls behind on 2 or | | | | So, the bank takes over the property. They get rid of |
| 3 payments. This causes the lender to issue a Notice | | | | the people. They make sure the place is cleared out. |
| of Default which is sent to the home owner and | | | | They then hire a local real estate broker - usually one |
| recorded at the Court House, usually in the Sheriff's | | | | who specializes in foreclosed properties - to place the |
| office. The home owner then has a period of time - | | | | property in the MLS and market it for sale. |
| often six to eight months - to contact the lender and | | | | The property is generally priced a little below market |
| make some kind of arrangement to prevent the home | | | | price. However, it is offered in as-is condition and no |
| from being sold at the Sheriff's sale which is generally | | | | repairs will be made. One general exception to this is a |
| held once a month. | | | | problem with an on-site septic system. In the case of |
| Many home owners fail to do anything. They don't | | | | the house with no kitchen, the MLS listing clearly states |
| contact the bank. They don't contact a Realtor® | | | | that the bank will not replace it - and that getting |
| about putting the house up for sale or try to negotiate | | | | financing could prove difficult. |
| a short sale. (A short sale requires lender approval | | | | Savvy buyers, knowing it is a bank owned property, |
| because the home owner is selling the home for less | | | | are wise to make a low offer, much lower than they |
| than is owed - typically around 20% - and the lender | | | | are willing to pay. The bank will then negotiate. The final |
| must agree to the deal). | | | | sales price will typically end up midway between what |
| So, the home comes up for Sheriff Sale. These | | | | the bank is asking and what the buyer is offering. The |
| homes are advertised in the local paper once a week | | | | longer the property has been on the market, the more |
| for a few weeks, usually in the classified section. If you | | | | likely the buyer is to get a better deal. |
| have never been to your local Sheriff Sale, and you | | | | When deciding what to offer, be sure to factor in any |
| are interested in buying a foreclosure, you should | | | | and all repairs to the home that will be required. Also |
| attend one to see how it works. | | | | be sure to select a Realtor® who is willing to go in |
| If the home owner owes more on the house than it is | | | | with a low-ball offer. Some Realtors® are |
| currently worth, buying the home at a Sheriff Sale | | | | uncomfortable doing this and are not good at playing |
| would not make much sense, because you would | | | | hardball with the banks to get the best possible deal. |
| have to cover what is owed. This is a common | | | | You should also be prepared to not get the house if |
| scenario in today's market. In this case, the bank takes | | | | the bank is unwilling to accept your price. |
| the home back and adds it to the bank inventory of | | | | |