Foreclosures: What You Need To Know

You can usually find road signs and online advertisements that say things like “We buy houses.” These ads are typically from real estate investors looking to obtain a property at a discount, such as a property that is in foreclosure. A foreclosure, often referred to as a REO or bank property, is a type of distressed property that has been reversed under the control of the original lender. Real estate investors and discount home buyers often look to these types of properties as an alternative to paying higher prices on traditional retail properties. In many cases, a foreclosed property will sell at or below market value. In some situations, however, they will sell for well above market value. For this and many other reasons, those who are interested in buying foreclosed properties should familiarize themselves with the way foreclosures are conducted before attempting to invest large sums of money in these types of assets.

Common Types of Foreclosure Sales

There are two main methods of buying foreclosures. A person can buy a foreclosure through a real estate agent or through a public auction. If a person is looking to buy foreclosure through a real estate agent, it is generally a good idea to ensure that the real estate agent they are working with specializes in this type of real estate transaction. On the other hand, a person can easily bid for foreclosures at a public auction in the county where the property resides. Most public auctions, which involve REO properties, are held online or in the manner designated by the real estate laws of a given state. Since you are not a lawyer, you should carefully read the laws governing foreclosure in the state in which you are interested in conducting real estate transactions.

The downside of public auctions

The downside to buying foreclosures at a public auction is that real estate investors sometimes bid properties above retail market value. This can become a problem for people interested in getting a return on their investment. Another drawback of public auctions is that the bank or lender is generally not required to offer collateral, and the property will likely be transferred via a deed of claim of resignation, rather than a deed of guarantee. In general, it is a good idea to research the different types of property titles. You’ll want to know what it means to have a certain type of deed for a foreclosed property before you commit to buying.

Title search and title insurance

In many foreclosure cases, people imagine that they will save money by skipping the step of having a title search company perform a title search. This is a very risky and reckless practice. When you pay for a title search, the title company actively and painstakingly looks for any clouds in the title that might reappear later and pose a problem. Buying title insurance also helps protect the property owner if any lost title issues lead to legal action against the new owner from foreclosure. For example, the property’s bank or lender may not have owned the property before it went up for public auction. In such a case, the person or entity in the title chain who can prove they have an unresolved interest in the property can sue for damages. Without title insurance to protect the owner from foreclosure, this will generally leave the new owner with a large financial loss that could have been avoided.

conclusion

Although buying foreclosures is a great way to pick up properties at a discounted price, a person should always be aware of the issues involved to mitigate any risk. Understanding state laws and taking all necessary precautions will generally lead to a profitable outcome for a smart person trying to buy foreclosures. Those who learn to earn sizeable income from foreclosures will often see the value of using ads that say, “We buy houses,” to help them make more profit in the foreclosure market.