How to Buy a Foreclosure
Are you ready to buy a home, but maybe you can’t afford a large mortgage? Or perhaps you want to purchase a home in a highly desirable neighborhood and you can’t compete with other offers. Purchasing a foreclosure may be your answer! We’ve compiled a general guide for how to buy a property that’s in foreclosure to help you understand the process. Keep reading!
What is a Foreclosure?
Before we begin, we want to explain what a foreclosure actually is first. A foreclosure is when a borrower defaults on their loan, which allows the lender to take ownership of the property. Once the lender has taken control of the property, they almost always sell the property to make up for their losses. Potential home buyers and investors are then able to purchase these foreclosed homes, usually at an auction or directly from the lender. A foreclosure happens when the current homeowner is no longer able to make the agreed-upon payments on the mortgage. This could happen for a variety of reasons including debt, loss of income, divorce, or other issues.
Now that you understand what a foreclosure is, we are breaking down how to go about purchasing a property in foreclosure. Here are five steps from the team at Hudler Homes:
Step 1: Understand Your Options
The first step is to find the property in foreclosure that you’d like to purchase. You can locate a foreclosure property for sale by checking local home auctions. If a property does not sell at auction, you can approach the original lender to purchase the home directly from them. There is also the option to purchase a short sale directly with the homeowner.
Step 2: Work with a Real Estate Professional
The three options above are very different and will require the help of an experienced real estate professional. A professional real estate agent can help you navigate the foreclosure buying experience.
Step 3: Get Pre-Approved for a Mortgage
Once you’ve located the foreclosure property you’d like to purchase, it’s time to get pre-approved for a mortgage. A pre-approval letter will tell you exactly how much a lender will be willing to loan you for a mortgage. Then it’s time to put in an offer!
Step 4: Get the Property Appraised and Inspected
Once your offer is accepted, or you purchase the property from an auction, it’s very important to have your home appraised and thoroughly inspected. Most of the time, a home in foreclosure will have more damage than a typical home that’s listed by the owner. Know what you’re getting into before you buy.
Step 5: Close on Your New Property!
After your inspection, you can choose to move forward and close on your new property. Congrats!
Do you have more questions about buying a foreclosure? If you are looking for a real estate agent who knows the Baltimore area and can help you explore your options, I’d love to meet with you. Reach out to me through my website or give me a call at (302) 545-8569, and follow my blog for more home buying tips!