Many people hear the term “foreclosure” and think they can get a steal on a property. However, the price you end up paying can be dependent on the phase of foreclosure. A house isn’t foreclosed upon overnight. Here we’ll break down the phases of foreclosure and the advantages of buying a home in each phase.
Missed Payments/Motivated Seller
- Seller will be motivated to achieve a fast sale, may create an opportunity for below market purchase price.
- Seller may be more likely to do repairs.
- Seller might be amenable to providing major closing cost credits and other concessions.
- Buyer can use regular mortgage financing.
- Buyer can obtain desired inspections within standard due diligence/contingency period.
- Seller must legally provide a complete history of property’s condition, problems, repairs, etc.
- Seller will be motivated for fast sale, increasing buyer’s bargaining power.
- Buyer can do all standard inspections, including researching title during due diligence/contingency period.
- 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)
- Bank is motivated to get the property sold and will negotiate price, down payment, closing costs, escrow length, etc.
- Title will be clear; buyer will not take on any liens, mortgage or back taxes of prior owners.
- Inspections and mortgage financing are allowed within normal due diligence/contingency period.
- House will be vacant.
- Property will usually be listed on MLS; the bank will pay real estate agent’s commission.
- REO sales close within a normal escrow period of time.
Depending on your timeline and budget, a home in foreclosure stage could be a great value and help expand your inventory options. If you’re interested in checking out these types of properties in the Mile High, give Metrowest a shout – we’d love to help you start the process.