Foreclosure Property:

Foreclosure is a legal process that occurs when a borrower defaults on a mortgage loan. Lenders foreclose on the property to satisfy the outstanding balance on the mortgage loan.

The main players involved in residential mortgage loan transactions and foreclosures are the borrower, the lender, the investor, and the service.

A foreclosed property usually gives the best deals in the market, but there are some risks linked with it. If someone is interested then it is necessary to first check the auctioned property personally for the quality purpose, the layout of the construction, and the neighborhood. Trusting online advertising is perceived to have been tricky at times. Buyers should cross-check all required property documents and assure that no dues such as loan payments, property taxes or even bills like electricity and water are pending.

What is meant by foreclosure property?
A foreclosure property is a piece of property that a mortgage lender sells to pay off a defaulted mortgage loan. Every foreclosure ends in a public auction where the lender sells the property and anybody can buy the property. Or you can buy a foreclosure property from a bank after the bank purchases the property at the auction.

Types of foreclosure:

Judicial foreclosure: it wants the lender to go through the court rule to take back ownership of the property. The lender will have to start a foreclosure by filing a claim against the borrower. All the parties have to be informed or notified of the foreclosure. A legal decision is announced (usually at a short hearing) after the exchange of appealings.

Non-judicial foreclosure: here, if a power of sale clause is stated in the mortgage or if such a condition was used in a deed of trust, then the lender can use foreclosure by power of sale.  There is no court direction or guidance.

In some circumstances, lenders make modifications to the borrower’s repayment schedule so that he/she can manage the payments and therefore hold ownership. This condition is known as special forbearance or mortgage modification.

What is meant by Preforeclosure?
In case of both judicial and non-judicial foreclosures, the foreclosing party must mail the other party declaring that foreclosure processes will start upon non-payment of the loan amount. The notice usually grants 30 days to the borrower to pay the due amounts.

In what scenario we can defense to foreclosure?
The borrower can proceed certain defenses depending upon the situation:
If the foreclosing party can’t prove that it owns the debt.
If the borrower is on active duty in the military and is entitled to protection from foreclosure under the Service Members Civil Relief Act (SCRA).
The foreclosing party didn’t follow the required procedure to foreclose.

Why does seller go into foreclosure?
Sellers stop making payments for several reasons: Laid-off, fired from the job, quitting the job, etc.
Incompetence to continue working due to medical conditions
Unnecessary debt and rising bill responsibilities
Disputes with co-owner, divorce
Transfer of job to another state
Maintenance issues which they can’t afford

What all do we gain from foreclosure property?
Financial gains
Lower mortgage payments
Early due diligence
High return on investments

Tips to avoid difficulties in the process of buying a foreclosed property:

Research well about the neighborhood
While buying a foreclosed property, the first step is to decide the pros and cons of living in a particular area. Look for similar properties in the neighborhood to experience and raise your gains. Also, keep in mind that the people around you will not only affect you but also the value of your home in the future. If you are not interested to live in that neighborhood, the price of the property really doesn’t matter.

Plan your budget nicely
While investing in a foreclosure property, always maintain the additional expenses that you might have to carry. In spite of that, you have to carefully estimate all the repairs and renovations that you want to make and list the expenses accordingly. Before settling the agreement, make sure you know the current or original prices related to plumbing, electrical, and other major repairs in the market, This, successively, will help you making negative cash run in the future.

Do not invest in long-vacant property
You must estimate the amount of time the house has lived vacant. In most cases, it is found that the longer the duration, the more the damages. The assets, including the plumbing, electrical, and air conditioning system manage to depreciate over a period of time. The property, after a certain period of time, becomes more of a saddened property that would need major repairs.

Bid that worth the money
While going for foreclosure, set a deadline for yourself keeping in mind your budget, the number of additional expenses, and the means of funding that you would want to avail. Remember, the bank that is selling the property will not grant a loan for the same. Hence, you need to have your decisions in place already. There are two things which you should always keep in mind while going for a bid. Firstly, the bank is not emotionally attached to the property and has no wrong expectations about the price. Secondly, the bank is losing money for every day the property is put on hold.