Here’s the clarification: Sellers don’t decide to go into foreclosure, they are foreclosed upon by a lender who files a lawsuit against them. Not because owners stopped paying but because they want the title to the home back because payments have stopped. The process has to be done in court.
Sellers stop making payments for lots of reasons. Few choose to go into foreclosure voluntarily. It’s often a result from one of the following:
- Laid-off, fired or quit job
- Inability to continue working due to medical conditions
- Excessive debt and mounting bill obligations
- Squabbles with co-owner, divorce
- Job transfer to another state
Home buyers who want a good deal in real estate invariably think first about pursuing foreclosures.
Buyers have this picture in their mind of a cute little house, surrounded by a white picket fence that is owned by a widow who had some tough hard times, but that scenario is generally far from reality.
Negotiating Directly with Sellers in Foreclosure
Investors who specialize in buying foreclosures often prefer to purchase these homes before the foreclosure proceedings are final. Before approaching a seller in distress, consider:
- Foreclosure proceedings vary from state to state.
- they are either judicial which means they are handled in court.
- or non-judicial which means court proceedings don’t need to be used
- In states where mortgages are used, homeowners can end up staying in the property for almost a year; whereas, in states where trust deeds are used, a seller has less than four months before the trustee’s sale.
- Almost every state provides for some period of redemption. This means the seller has an irrevocable right during a certain length of time to cure the default, including paying all foreclosure costs, back interest and missed principal payments, to regain control of the property.
- Many states require buyers give sellers certain disclosures regarding equity purchases. Failure to provide those notices and to prepare offers on the required paperwork can result in fines, lawsuits or even revocation of sale.
Buying a Home at a Trustee Sale
Sales may be handled through:
- Purchase property “as is”
- Proof of financial qualifications
- No loan contingency
- Sealed bids
- Sizeable earnest money deposit
Sometimes buyers are not allowed to inspect the house before making an offer. The problem with buying a house sight unseen is you can’t calculate how much it will cost to improve the structure or bring it up to habitable standards. Nor do you know if the occupant will retaliate and destroy the interior.
On top of that, you may need to evict the tenant or owner from the premises after you receive title, and eviction processes can be costly.
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