During your home search, you’ve probably encountered some houses listed as “foreclosures”. Let’s take a look at what that really means, and things to look out for when purchasing foreclosed home!
What classifies a home as a “foreclosure”?
A home is classified as a foreclosure when the bank, rather than the original buyer, is in possession of the home. A foreclosed home is not usually put on the market for sale until the full foreclosure process is complete. The process consists of 3 stages:
- Pre-foreclosure, where the bank files a notice of default allowing the owner to either refinance the home while still in possession of it or try to sell the home as a short sale.
- Auction, when the owner fails to refinance or sell the home in the allotted time frame given and the bank holds an auction to sell the home as-is to the highest bidder.
- Bank Owned, when the home fails to sell at auction and the bank with the primary mortgage on the home is awarded ownership.
What can cause someone to foreclose on their home?
The main reason an owner forecloses on their home is that they are unable to make their mortgage payments. This can be due to divorce or a split between persons in the household, medical reasons like an unexpected illness, job loss, and in some cases, death of the homeowner.
What to look out for when purchasing a foreclosed home:
Purchasing a foreclosed home is a slightly more intricate process than one that is for sale by the owner. Here are some tips for consideration when purchasing this type of home:
- Pick an agent that specializes in foreclosures. This will ensure that the process is done correctly and that there are fewer surprises along the way.
- There is very little room for negotiation. In most cases, the price of a foreclosed home and terms of the sale are unable to be altered in any way.
- The bank is not responsible for repairs. During a standard home sale, a home inspection is conducted and the buyer can request repairs be made by the seller before the purchase is made. Foreclosed homes come as-is, no matter what shape they are in.
- Understand that the process of buying a foreclosed home is much different than for standard homes and may take longer than originally expected.
Want more information about purchasing foreclosed homes in Maryland? Armour Settlement Services, LLC is a title insurance company dedicated to assisting realtors, lenders, and homeowners throughout the home sale and purchasing process. Contact us today to learn how we can help!