A client of ours was asking about pre-foreclosures and foreclosures this week, so we figured we'd share a few thoughts about these properties.
When searching properties online, you may find properties on Zillow or other sites listed as a "pre-foreclosure." Basically, what this means is the owners have missed a few payments and have been notified by the bank that they need to pay in order to keep the foreclosure process from starting. At this point, the house is not for sale nor may the owners have any intent of listing it for sale in the near future. As agents, there’s very little we can do in a pre-foreclosure other than hunt down the owner’s information, call them up, and ask them if they want to sell their house. However, inquiries of this type often result in upsetting and frustrating the owner rather than a conversation about a possible sale. Most owners in this situation find a way to make their payments so they don’t lose their house. Or, if they really can’t catch up, they may reach out to an agent to sell their home and pay off their debt. If they’re unable to make their payments or sell the home for more than what they owe, then the property will likely go into foreclosure. Just as during pre-foreclosure, there is very little we can do as agents during the actual foreclosure process. We can find out which bank is foreclosing, but trying to track down someone at the bank who can actually negotiate a sale in the middle of the foreclosure process is very difficult, if not impossible.
Near the end of the foreclosure process, the home may go to auction to be sold. Most houses sold in foreclosure auctions need to be bought with cash, due in full at the time of the auction. Additionally, there is usually no opportunity to view the interior of the property or perform any type of inspection. Buyers who try to purchase homes through foreclosure auctions take on much greater risk then those who purchase homes through the regular process and often find they are competing with investors who do this for a living. It’s a challenging pursuit to say the least!
If the property doesn’t sell at the auction, the bank takes back the home and does the work necessary to list the property with a real estate agent. It’s important to note that the time it takes a property to move through the foreclosure process isn’t quick. Going from pre-foreclosure to the home actually being foreclosed on and then listed by an agent can sometimes take 2-3 years. This is why, for serious buyers, we would say homes that are in pre-foreclosure or in the middle of the foreclosure process are likely not worth the wait. Instead, focus on regular sales or foreclosed homes that have already made it through the process and are now listed by an agent on the MLS. Once listed, foreclosed homes can be pursued by buyers much like any other listing. Buyers are able to view the home, make an offer, get a loan for the purchase, close within a reasonable amount of time, have a home inspection, and take other necessary steps to limit risk and insure a solid investment.
For more information about foreclosures or to see foreclosure listings, click HERE!
For more blog posts by Benj Foreman, click HERE