Youíll find there are some people who tout the benefits and advantages of buying homes that have gone through foreclosures. Often, those homes are offered up for auction to the highest bidder and there are some really good deals to be had at that point.
There are some very important pieces of information you should have before you start planning to buy homes that have been foreclose upon.
First, understand that a lender gave money to the person who wanted to buy that house in order for that borrower to make the transaction. The lender had some expectation that heíd recover all that money plus some interest, but most lenders simply arenít in a position to handle property. They donít want to foreclose on the house because then theyíre going to have to do something with it. That means that the foreclosure process could take a long time while they look for some way to recover the loan from the original borrower, but it also means that most lenders are going to foreclose and then quickly offer the property at auction.
Youíve probably heard about auctions that ended with buyers getting really good deals. That happens, but itís not always the case. Why would a lender agree to let a particular piece of property go for less than itís worth? Remember that the lender isnít in the real estate business and their primary objective will usually be to recover the amount of the original loan plus interest, if possible. If the original loan had been paid down significantly, the lender could agree to sell the property for a fraction of its value.
Another important point is that these auctions will typically be made public. For the person hoping to bid on the property after the foreclosure is complete, this probably means youíre going to have some competition. This is the main reason itís not a good idea to allow the foreclosure process to run its course before you try to buy a particular piece of property ñ or to buy it back if you were the owner before the foreclosure.
Most lenders arenít anxious to see property in foreclosure. Theyíll often work with the owner for a long time, hoping that the loan will eventually be repaid. But when they have to foreclose, they usually donít want to hold the property long while looking for a buyer whoíll offer up a good deal. If youíre planning to visit some foreclosure auctions, you may very well find an incredible deal.