Exploring the Different Phases of Foreclosure

While you might hear the term “foreclosure” and immediately think you can get a steal on a property, there are actually different phases of the foreclosure process that will impact your price and methodology for buying this type of residence. If you’re considering a distressed property – like a foreclosure – make sure to understand the different phases and how they will affect your buying experience.

The first phase of foreclosure is considered is “Missed Payments/Motivated Seller”

  • The seller is motivated to achieve a fast sale and may create an opportunity for below market purchase price.
  • The seller may be more likely to do repairs.
  • The seller might be agreeable to providing major closing cost credits and other concessions.
  • The buyer can use regular mortgage financing.
  • The buyer can obtain desired inspections within standard due diligence/contingency period.
  • The seller must legally provide a complete history of the property’s condition, problems, repairs, etc.

Pre-Foreclosure/Short Sale

  • The seller is motivated for fast sale, which increases the buyer’s bargaining power.
  • The buyer can do all standard inspections, including researching title during due diligence/contingency period.

Foreclosure Auction

  • The property will be sold for outstanding mortgage balance owed to foreclosing mortgage holder — this can be a low price for the property.
  • Cash payment requirements reduce competition.

Post-Foreclosure/Real Estate Owned (REO)

  • The bank is motivated to get the property sold and will negotiate price, down payment, closing costs, escrow length, etc.
  • The title will be clear, meaning the buyer will not take on any liens, mortgage or back taxes of prior owners.
  • The inspections and mortgage financing are allowed within normal due diligence/contingency period.
  • The house will be vacant.
  • REO sales close within a normal escrow period of time.

Depending on your timeline and budget, a home in one of the foreclosure stages could be a great value and help expand your inventory options. If you’re ready to start checking out these types of properties in Denver, give Metrowest a shout – we’d love to help you start the process.

Get More Real Estate Market Info... Subscribe Below!

Learn more about us and find other resources on buying investment properties with us. Like us, follow us, connect!

Leave a Reply

Your email address will not be published. Required fields are marked *