We are searching now because the market is definitely down and prime for buyers. The market is flooded with Foreclosures and more showing every day. However, ive had the conversation with several people about how every foreclosure was somone's home & dream. This is, after all, the american dream. SO, with the guilt of buying up somone elses broken dream already firmly in place, Ive discovered a part of the market that I had formerly not known about- Pre-foreclosures.
Pre-foreclosures are homes that have gone into default but have not yet been re-possessed by the lender. To help you understand a foreclosure timeline, here's a brief tutorial (Ive learned alot in the last few days:
Notice of default- the Homeowner is at least 3 months behind in payments to the lender. A notice of default is posted at the county clerks office. The homeowner has up to 60 days to get their loan current or work out a payment solution to get current with the lender.
Auction- If the owner cannot get their debt current with the lender, the next step is auction. A notice of sale is posted and their home is auctioned off on a set date for the back owed amount plus fees that may have occurred due to the process. The owner has rights of ownership until I think 5 days before the sale. (after the sale, the owner has 240 days to buy back their house for the amount sold plus 6% interest)
Realestate owned- If the home doesnt sell at auction, the bank will usually take posession and send it to their REO dept. They figure out the amount owed and set a price. Then get it listed with the MLS to be sold. Usually at this point, the home is given a clean title and probably has some issue that kept it for going at auction (damage etc.)
Owners in pre-foreclosure sometimes try to sell their home for the amount owed so that they dont have the black mark of a foreclosure on their record and perhaps have a little extra to maybe start over. Some try (sometimes successfully) to save their home and make no attempt to sell. Either way, they arent facing the gun yet, but are on shaky ground.
Now, MANY people search for pre-foreclosures because the potential for a very reduced price with alot of house is a good bet. You can save up to 90% of the market value. But it feels smarmy.... You are circling like a shark (as my hubby did the jaws theme behind me the other night) waiting for someone's bad luck (or bad choice) to benefit you.
Alot of people made bad choices buying more house than they could afford using risky lending practices and are now looking at possible foreclosure. So in a sense, you try to justify what youre doing. But I still feel smarmy.
In case you were wondering, yes, I have found a house in pre-foreclosure that we like. Ive talked with the bank to find out what their status is. I'm watching this property to see if it goes further down the process making itself available to us. They are not attempting to sell their house (and I havent contacted them) And having mixed feelings the whole way. We are trying to make every penny we have count for us. That means taking advantage of this market and put us in a better place to have more room and land.
How do you feel? Would you search around pre-foreclosures? Auctions? Foreclosures?
I think buying a pre-foreclosure is a good thing for you and the person losing their home. How much worse for them if there was no buyer and they not only lost their home but also had the blackmark of a foreclosure on their hands? I've heard too many stories from a friend (who works in the mortgage industry) that people are walking away from their mortgages without so much as a backward glance. It's just horrible. Buying their houses is actually doing them good. They can walk away from the experience hopefully having learned something and not just losing their home.
ReplyDeleteyeah, I agree. You are fulfilling your "American dream" and perhaps letting the other person out of theirs- cuz they couldn't afford it. Good luck!
ReplyDeleteBeing a military family who needs a house NOW and chooses to buy, none of these options are good for us. The process takes too long. So, I would never be buying pre-forclosures (still need homeowner AND their lender's approval), auctions, or foreclosures. I am always going to pay it forward because of our sale in VA. We will try to buy from another family who is desperate to sell because of relocation. Personally, life is about choices. Every one of us knows what we can afford. Banks lend people too much money and now everyone is paying that price. Lenders will work with people. I know someone who had an interest only that came to an end. He managed to work out interest only with the lender for another TEN years. The lender didn't want the house so they worked with the owner. Win win.
ReplyDeletethats awesome.. Here's the strange twist to this post..The house I was looking at was erroneously marked as a notice of trustee sale at the county clerks office. the bank called me back and said that not only was this house not in the foreclosure process, but was paid off! I have to say that my reaction was relief. I was glad to hear that at least one family was safe from this nasty little axe. And I have to admit that Ive avoided looking at the pre-foreclosures since. I'm more than happy to help a family that neds to sell quickly, if theyre looking for a buyer, but I'm going to avoid contacting them before theyve made that decision.
ReplyDelete