So you want to buy a foreclosure! (THE LINK IS AT THE END OF THIS PAGE) 

Foreclosures are fast becoming a good way to buy a home under market in days real estate market. But, a foreclosure is not for everyone. Sure you might get a great buy, but often these homes need a good bit of work. Missing appliances, deferred maintance, updating and damage name a few.  

Lets look at how a home goes into foreclosure and the process it takes to be purchased.  

In Georgia, after a buyer has missed numerous payments a foreclosure notice must be mailed by certified mail, return receipt requested to the borrower demanding payment. If the homeowner does not bring the payments current a notice notice must be published in a newspaper of general circulation in the county where the sale will be held once a week for four (4) weeks. After the 4 week process the home is then sold by public auction the first Tuesday of the month between 10:00 am and 4:00 p.m. at the courthouse.  

At the time of the courthouse auction, interested parties will gather on the courthouse steps and when the auction begins, the properties are auctioned to the highest bidder. It sounds simple enough... but  

First the lender who holds the original note on the property will most likely be there to throw out a bid for the amount owed to the bank. Thus the hopes of bidding $100.00 for a home are shot! A person buying a home on the courthouse steps takes on a lot of liability and responsibilty. First, one rarely gets to see the interior of the property, as it might still be occupied. Second, the new owner can be responsible for all tax liens on the property. So, basically, one can buy a property that has liens on it, and be occupied and have to go through eviction, wich can take months. Then you get to see the interior! So this way is not for the faint of heart.  

The best way is to buy a home that has been already foreclosed on and has been turned over to a REO company (Real Estate Owned). These homes have usually been bought back by the lender who held the original loan. One the lender owns the property, they pay off all the liens, evict the tenants (previous owners) and clean up the property. They usually hire a company that specializes in REO Properties . This REO company then hires a local REALTOR to handle the marketing of the property.  

What do I do when I find a REO that I am interested in? 

Ok, so you have done your homework. You have found a REO that you want to make an offer on. In order to make an offer on a property, just about all the REO companies require a pre qualification letter or proof of funds letter (if paying cash) or they won't consider your offer. You don't want to loose out on a home you found by waiting on your pre qualification letter, so its best to talk with a lender in advance.  

Making an offer 

Most foreclosures are priced below market already. The good ones don't last. Remember, the home is already discounted, so be careful in making too low an offer. You don't want to be beat out. If multiple offers come in on a home, the bank will usually come back with "highest and best." What Highest and best" means is that the bank will notify all parties that put a offer on the home that they have 24 hours to pull their offer, keep it the same, or up their offer. Then after the time period (usually 24 hours) the bank will pick from the offers in hand. All banks require an earnest money deposit, so be prepared. Earnest money amounts vary, but be prepared for a minimum of $100.00.  

Keep in mind, nothing happens on a holidays, weekends, or evenings. (banks are closed) 

After your offer is accepted 

Since the seller has never lived in the property, there will be no sellers disclosure, and no history of repairs. So it is very important that you hire a inspector to inspect the home from top to bottom. The home is sold "AS IS". The owner will do no repairs.  

Also, some banks will require that your earnest money be certified funds and made payable to the listing agent, or to the sellers attorney. If you are getting a loan, it is very important that you work with your lender to be sure the closing is on time. Most banks have clauses in their paperwork that you will be charged up to $100.00 a day for every day that the home does not close. Also, most of the time, your earnest money becomes non refundable after the inspection period. 

On purchasing a foreclosed home, one should always purchase a owners title insurance policy. This policy will protect your home in case of a title problem with your new home. For further information and costs, check with your closing attorney. 

One last note. 

Due to the nature of a home being taken from its owners, sometimes title problems do occur and a closing might be delayed. Remember, there is nothing your Realtor can do to speed things up. It is a legal process that an agent has no control over. 

I hope that this answers your questions. If you want to view some foreclosed homes, I'm just a phone call away. Remember, the good ones don't last!
 

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