Foreclosures

Legal Focused Topics

One of the best ways to obtain affordable property is to buy a foreclosure property. While this may get you good rates and a great locality, it is a method that requires careful research, expert support and lots of consideration.

What are Foreclosures?

Foreclosures, sometimes called REO properties, are residences that have been repossessed by the lender due to nonpayment of the mortgage. Thousands of homes end up in foreclosure every year, a fact that is also affected by economic conditions. Other factors that lead to foreclosures are job loss, credit problems and unexpected expenses.

Types of Foreclosure

Foreclosures can either be judicial or non-judicial. Judicial foreclosure action is a proceeding in which a mortgagee, a trustee or another lien holder on property requests a court-supervised sale of the property to cover the unpaid balance of a delinquent debt. Non-judicial foreclosure on the other hand is the process of selling real property under a power of sale in a mortgage or deed of trust that is in default. In such a foreclosure, however, the lender is unable to obtain a deficiency judgment, which makes some title insurance companies reluctant to issue a policy.

Where to Find Foreclosures

Most states require that a foreclosure notice be published in the legal notices section of a local newspaper where the property is located or in the nearest city. Also, these notices are posted on the property itself and somewhere in the city where the sale would take place. Also the U.S. Department of Housing and Urban Development acquires properties from lenders who foreclose on mortgages insured by HUD. These properties are available for sale to both homeowner-occupants and investors.

Considerations

While foreclosure seems a good option, it is best to proceed cautiously. First time buyers should hire an expert, a qualified attorney to help them move through this process, as there can be many pitfalls. The house should be thoroughly inspected and all documents checked to ensure that no un-cleared liens, undisclosed mortgages or court judgments are not pending.

Foreclosure Financing

It is quite difficult to get financing for a foreclosed property. Often the only way to obtain financing is to put up a great deal of cash, or work on a line of credit with your bank where you can draw a cashier’s checks.