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.

Ken Blevins

About Ken Blevins

Ken Blevins, CEO of Metrowest Real Estate Services, is a veteran in mortgage and default servicing with more than 24 years of experience in collections, foreclosure/bankruptcy, loss mitigation and real estate disposition (REO). Blevins was an original co-founder of Metrowest in 2003, a Real Estate Brokerage and Services Company focused on the resale, recovery and liquidation of distressed real estate in Denver, Colorado and surrounding metros. Blevins assumed the role of CEO in January 2014 and provides strategic direction and has management accountability for the day-to-day operations. Under his direction, Blevins drives all default management operations to maximize asset value recovery and reduce loss severity through a strategy focused on customer service and state of the art technology. Blevins has 18 years of direct operational experience in all facets of REO Asset Management having managed large national REO Disposition contracts for Fannie Mae, Freddie Mac, Wells Fargo, JP Morgan Chase, CitiFinancial, GMAC Mortgage and other various financial institutions. Blevins specialties include REO asset management, real estate investment, bulk REO acquisitions and distressed asset recovery and liquidation, and he has directed the resolution and liquidation of over ten billion in institutionally-owned residential real estate.

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