Everyone has heard of foreclosure homes. Some of them can be nightmares but some of them can offer a solid home at a very good value for an incredibly low price. The best thing you can do, if you are interested in a foreclosed home is to inform yourself. The realtor handling the property will be able to help you with all the terms you may not be familiar with. He or she can also point out the things you need to know when interested in such a home and can set the purchase in action if you decide to buy.
Real Estate Lingo
It is often frustrating to hear abbreviations and acronyms tossed about if you have no idea what they mean. When you hear or see the letters “REO” it means the home has been taken over by the bank. It stands for Real Estate Owned. When you buy such a property, there is no previous owner living in this home any longer. The bank also has already paid any back taxes and other, older liens. The good thing about an REO is that the owner of the home has no more possibility to vandalize the home as often happens. People losing their homes are often quite upset and will not hand over their home in pristine condition. Sometimes an REO will have already gone unsuccessfully through an auction, in which case you can try a low bid to the bank.
HUD
Homes owned by Housing and Urban Development means they are residential homes owned by the government. These homes are purchased when someone defaults on an FHA-insured loan for the property. Purchase of a HUD home is available to anyone who qualifies for a home loan but private persons interested in buying it as their primary residence get preference. Only after bidding by non-investors is unsuccessful can investors bid. When you buy a HUD property, you must provide your own mortgage lender. You may qualify for an FHA 203 (k) loan if the home needs to be extensively repaired.
Buyer Beware
Sometimes a foreclosure property holder will not permit interested buyers to inspect the home beforehand. Most foreclosure sales are “as is” which may not be the most advantageous deal because you have no guarantee that the property is worth what you paid for it. When inspection is permitted, it is usually only within a short timeframe, like a week to ten days. You will have to hire your own inspector. Depending on the home and your ability to invest in repairs you may get a real diamond in the ruff or you may get a potential headache.
Financing
Paying for a foreclosed home has its own rules. When you need financing for a foreclosed home, it is prudent to discuss this first with the bank that holds the lien to the home. A letter from a bank that has pre-approved your loan is an essential document to have on hand when placing your bid. Once a foreclosure is opening for bids, everything happens quickly and the better prepared you are the better your chance of securing the property you want.
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