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Are foreclosures an option?
ANSWER: A foreclosure property is a home that
has been repossessed by the lender because the owners
failed to pay the mortgage. Thousands of homes end up in
foreclosure every year. Economic conditions affect the
number of foreclosures, too. Many people lose their
homes due to job loss, credit problems or unexpected
expenses. It is wise to be cautious when considering a
foreclosure. Many experts, in fact, advise inexperienced
buyers to hire an expert to take them through the
process. It is important to have the house thoroughly
inspected and to be sure that any liens, undisclosed
mortgages or court judgements are cleared or at least
disclosed.
Can I get a HUD home for as little as $100 down?
ANSWER: If you are strapped for cash and
looking for a bargain, you may be able to buy a
foreclosure property acquired by the U.S. Department of
Housing and Urban Development for as little as $100
down. With HUD foreclosures, down payments vary
depending on whether the property is eligible for FHA
insurance. If not, payments range from 5 to 20 percent.
But when the property is FHA-insured, the down payment
can go much lower. Each offer must be accompanied by an
"earnest money" deposit equal to 5 percent of the bid
price, not to exceed $2,000 but not less than $500. The
U.S. Department of Veterans Affairs also offers
foreclosure properties which can be purchased directly
from the VA often well below market value and with a
down payment amount as low as 2 percent for
owner-occupants. Investors may be required to pay up to
10 percent of the purchase price as a down payment. This
is because the VA guarantees home loans and often ends
up owning the property if the veteran defaults.
If you are interested in purchasing a VA foreclosure,
call (800) 827-1000 or visit foreclosurefreesearch.com
for a current listing. About 100 new properties are
listed every two weeks. You should be aware that
foreclosure properties are sold "as is," meaning limited
repairs have been made but no structural or mechanical
warranties are implied.
Do you have to buy HUD homes through a realty agent?
ANSWER: You can only purchase a U.S.
Department of Housing and Urban Development property
through a licensed real estate broker. HUD will pay the
broker's commission up to 6 percent of the sales price.
How do you find government-repossessed homes?
ANSWER: 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. You can only purchase HUD-owned properties
through a licensed real estate broker. HUD will pay the
broker's commission up to 6 percent of the sales price.
Down payments vary depending on whether the property is
eligible for FHA insurance. If not, payments range from
the conventional market's 5 to 20 percent. One caution.
HUD homes are sold "as is," meaning limited repairs have
been made made but no structural or mechanical
warranties are implied.
How do you get financing for a foreclosure?
ANSWER: One reason there are few bidders at
foreclosure sales is that it is next to impossible to
get financing for such a property. You generally need to
show up with cash and lots of it, or a line of credit
with your bank upon which you can draw cashier's checks.
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What about buying a foreclosure "as is"?
ANSWER: Buying a foreclosure property can be
risky, especially for the novice. Usually, you buy a
foreclosure property as is, which means there is no
warranty implied for the condition of the property (in
other words, you can't go back to the seller for
repairs). The condition of foreclosure properties is
usually not known because an inspection of the interior
of the house is not possible before the sale. In
addition, there may be problems with the title, though
that is something you can check out before the purchase.
What happens at a trustee sale?
ANSWER: Trustee sales are advertised in
advance and require an all-cash bid. The sale is usually
conducted by a sheriff, a constable or lawyer acting as
trustee. This kind of sale, which usually attracts savvy
investors, is not for the novice. In a trustee sale, the
lender who holds the first loan on the property starts
the bidding at the amount of the loan being foreclosed.
Successful bidders receive a trustee's deed.
What types of foreclosure are there?
ANSWER: Judicial foreclosure action is a
proceeding in which a mortgagee, a trustee or another
lienholder on property requests a court-supervised sale
of the property to cover the unpaid balance of a
delinquent debt. Nonjudicial foreclosure 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 can you find foreclosed HUD homes?
ANSWER: 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. You can only buy HUD-owned properties through
a licensed real estate broker, whose commission will be
paid by HUD. Down payments vary depending on whether the
property is eligible for FHA insurance. If not, payments
range 5 to 20 percent. When the property is FHA-insured,
the down payment can go much lower. Each accepted offer
must be accompanied by an "earnest money" deposit equal
to 5 percent of the bid price not to exceed $2,000, but
not less than $500. You should be aware that HUD homes
are sold "as is," meaning limited repairs have been made
but no structural or mechanical warranties are implied.
Where can you find foreclosures?
ANSWER: In most states, a foreclosure notice
must be published in the legal notices section of a
local newspaper where the property is located or in the
nearest city. Also, foreclosure notices are usually
posted on the property itself and somewhere in the city
where the sale is to take place. When a homeowner is
late on three payments, the bank will record a notice of
default against the property. When the owner fails to
pay up, a trustee sale is held, and the property is sold
to the highest bidder. The financial institution that
has initiated foreclosure proceedings usually will set
the bid price at the loan amount. Despite these
seemingly straightforward rules, buying foreclosures is
not easy as it may sound. Sophisticated investors use
the technique so novices may find themselves among stiff
competition.
Resources: * "The Smart Money Guide to Bargain Homes,
How to Find and Buy Foreclosures," James I. Wiedemer,
Dearborn Financial Publishing, Chicago; 1994. *
"Real Estate Principles," Charles O. Stapleton III,
Thomas Moran and Martha R. Williams, Dearborn Financial
Publishing, Chicago; 2001. Purchase online. "Real Estate
Investing From A to Z," William H. Pivar, McGraw-Hill,
2003. Purchase online.
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