Many prospective buyers are lured by the rock bottom prices to purchase a home in foreclosure. Before attempting to do so it is important to understand the various stages of foreclosure and the unique challenges of each.
The first phase of foreclosure is pre-foreclosure. This means that the house is in the foreclosure process but it has yet to be auctioned. The bank does not own the home at this stage. Being in pre foreclosure may mean that the owner of the property owes more on the home than what it is currently worth but they definitely are not making their mortgage payments. When in this position, many homeowners, if they qualify, seek to sell their home through a short sale. As written in a previous blog post, the name “short sale” has nothing to do with the time duration of the sale. In fact, this can be a complicated and lengthy process. It is important when involved in a short sale to be working with an agent that is familiar with this process and can anticipate its nuances. With a short sale the buyer is entitled to an inspection before purchase. When buying during other stages of foreclosure this is not always true.
The second stage of foreclosure is the public auction at a foreclosure or trustee’s sale. At this stage, the homes are generally sold without prior inspection and so it is important to budget for repairs that may arise after purchase. The other outcome of the auction may be that the bank takes the home legally as a Real Estate Owned or REO property. Therefore, if a third party does not purchase the home at a price that works for the bank, the bank takes the property, which is the final stage of the foreclosure process. If taken by the bank the property will eventually go back on the market for sale as an REO.
This is a brief explanation of the basic stages of foreclosure taken from a larger article that can be found at cnn.com.
The Website below will show you various foreclosure properties on the market in your area by simply clicking on your region of California.
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