Tips For Buying a Foreclosed Home

Homebuyers in the market for a deal on their dream home need two things: lots of patience and the stomach to do battle with investors. Any home that is in a decent area and priced right is facing keen competition in today's market. Homebuyers in the market for a foreclosure need those qualities tenfold. Buying a foreclosure is a lengthy process, and, although most investors prefer pre-foreclosure sales and auctions, you will face your share of competition for bank-owned homes. Let's take a look at some foreclosure-buying options and how to participate.

Buying a Foreclosure at Auction

• Homes that are sold at auction, typically carried out at the county courthouse, are those that homeowners have lost because they failed to bring the mortgage current during the reinstatement period.

• The lender's representative, known as the trustee, will be on hand to receive the money from the winning bidder, if there is one. The opening bid is typically equal to the loan balance, trustee's fees, accrued interest and other costs incurred by the lender during the foreclosure process.

• Can you get a bargain at auction? That depends on how much the homeowner owed before defaulting on the loan. The opening bid must be met or the trustee purchases the property and it then becomes an REO, or "real estate owned" by the lender.

• You may have seen foreclosure auction shows on TV. If so, you know it isn't the place for a novice to get a good deal. Most of the bidders are highly experienced flippers and investors offering up fierce competition.

• You will also not be able to view the inside of the home or perform inspections. Plus, if you're the winning bidder, you may have to evict the current occupants. Depending on the state in which you live, eviction may be costly and time-consuming.

• Finally, many foreclosures have additional liens against them, which you will take on if you purchase the property. Recorded liens are public information; you can search for them at the county clerk's office, the county recorder or the assessor's office. But not all liens are recorded.

• One way to ensure you're protected is by purchasing an owner's title insurance policy.

Buying an REO

• Purchasing a bank-owned property is much easier than buying a home at auction and much like a conventional purchase.

• You'll need a loan preapproval letter from your lender, unless you're paying cash, and the services of a real estate agent.

• Most REO properties are vacant and somewhat cleaned up. Although the bank won't supply you with property disclosures as sellers in a conventional transaction are required to, you will be allowed time for inspections.

• Many experienced REO buyers perform extreme due diligence, such as checking the city planning office for permits that may be on file for any work the previous owner performed. Have anything that looks the slightest bit suspicious inspected, from the roof to the foundation.

• Your buyer's agent should be able to assist you in learning as much as possible about the home's history. And, since real estate brokers are required to hold on to transaction files for a number of years (varying according to state), if the home sold in the past few years, your agent may be able to track down a past disclosure.

• Banks typically don't pay for repairs to the property and other transaction fees, so you'll need to take on those expenses. Ultimately, although it may seem that you're getting a bargain-priced home, once all is said and done, it may be worth it to purchase another home in better condition.

Contact Katie Oakes to start your home search today or to learn more about the process of purchasing a foreclosed home. All information and services are provided by Katie Oakes with The Champagne Realty Group at Keller Williams Premiere Properties in Glen Ellyn, IL. Servicing Wheaton, Glen Ellyn, Winfield and the greater DuPage County area with over 130 million in closed sales volume.

Wheaton Foreclosures: Official Information on Foreclosures in Wheaton Listed For Sale

View all of the foreclosures listed for sale and still available in Wheaton, IL. Don't miss your chance to own a home at a great price in coveted Wheaton.

Not looking in Wheaton? Visit WheatonHomes4Sale.com to search hundreds of other Chicagoland areas including towns in Indiana and Wisconsin.

Information and service provided by Katie Oakes with Keller Williams Premiere Properties.

Foreclosures and Second Properties

What does it Mean to Buy and Bail?

Buying and bailing refers to the act of buying a second property and allowing a first home to fall into foreclosure. Homeowners who purchase second properties in this scenario are typically upside down on their primary residence, meaning they owe more on their first home than it is worth in the current market. It's likely that they had an adjustable rate mortgage and their monthly mortgage payment grew to a payment they could no longer afford. For some, an easy solution appears to be buying a second property at a depressed price with a fixed rate mortgage in order to lower their monthly mortgage payments. At the same time, they let their first home fall into foreclosure hence the term buying and bailing.



You may wonder why a lender would loan someone money for a second property when they are already having difficulty making the mortgage payments on their first home. Typically, the buying and bailing homeowners will state in their loan applications that they intend to rent out the first property, but it should be noted that lying on a loan application constitutes fraud. Fanny Mae and Freddy Mac have instituted rules to curb the practice, but it continues. In addition to fraud, homeowners could get themselves into deep water when dealing with foreclosure and second properties.

Things to Consider About Foreclosure and Second Properties

There are two different scenarios that can occur with foreclosures and second properties. The first is the buy and bail situation explained above where the homeowner buys a second property and allows the home that has been his primary residence to go into foreclosure. The second is where a homeowner has a second property, perhaps a vacation home, and allows that second property to go into foreclosure.
When a home goes into foreclosure it will be auctioned off, usually for a much lower amount than what is actually owed on the property. The difference between the amount owed and the amount received at auction is called a deficiency balance.

How the settlement of the deficiency balance will be handled varies greatly depending on where you live and your state's laws regarding foreclosure and the enforcement of deficiency balances. In about two-thirds of U.S. states, deficiency balances are treated like all other unsecured debts, and lenders may pursue a borrower after foreclosure by seeking a deficiency judgment. This allows a lien on the second property for the amount still owed on a previous mortgage. In states such as California and Arizona there are restrictions on lenders, and they may not have that option if the original home was a primary residence.

If you have a vacation home that goes into foreclosure, and end up owing a deficiency balance after foreclosure on that second property, the lender may file a lawsuit against you to collect the debt. This could result in garnishment of your wages, levies on your bank accounts, and/or liens placed on your property, including your primary residence, depending on your state's laws relating to the enforcement of judgments.
After foreclosure, the lender, otherwise known as the judgment creditor, may be able to force the sale of your primary residence to obtain the money needed to pay off its judgment depending on the state in which you live. Judgment creditors are more likely to pursue a forced sale of your property if you have a lot of equity in your home. Therefore, if you have a substantial amount of equity in your primary residence, you may want to think long and hard before allowing a foreclosure on your second property. A consultation with an attorney specializing in real estate law is advisable before deciding to let a foreclosure on a second property to occur.

To search for foreclosed properties for sale in your area visit my Free Property Search.


Provided by Katie Oakes with Keller Williams Premiere Properties

Foreclosures, Short Sales and Bankruptcies: Navigating Today's Housing Market

Facing a foreclosure, short sale or bankruptcy can feel like the end of the road. In reality, each of these programs was designed to help those in tough financial straits to get back up their feet. The chart below shows you what you can expect when confronting one of these personal fiscal challenges.

 If you or someone you know is having difficulty or is unable to pay their monthly mortgage payments please call Katie Oakes with Keller Williams Premiere Properties at 630.545.9860 . Our real estate team closed over 40 short sales in 2011 and has helped hundreds of clients back up on their feet.

Visit the WheatonHomes4Sale.com for more information.