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.
- 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.
- 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.