The Hassles Of Purchasing Foreclosed Houses Not Worth It

Posted on September 2, 2008
Filed Under Foreclosure Homes |

A close scrutiny will show that the hassles of purchasing foreclosed houses are not really worth the efforts. Foreclosures have always been part of the mortgage world but the recent foreclosure crisis raging across America is somewhat different. This is the worst type of foreclosure cycle that has happened since the Great Depression.

The housing market is choc-a-bloc with foreclosed houses waiting to be sold. Everyday more are rushing in causing discomfort to the houses being sold the usual way. The number is 121% higher this year during the second quarter in comparison to the same quarter in 2007. This has caused the price of houses to tumble and fall to unprecedented levels. Many might be tempted at this juncture to snap up what appears to be bargain deals. But the thumb rule is that one should look before leaping. It applies to buying foreclosed houses also because for the unwary there are catches.

The first thing is to know what the judicial process of foreclosure is all about. It consists of three stages – defaulting in mortgage payment for more than 90 days leads to the loan becoming delinquent. But before this happens, that is during the pre-foreclosure stage one can reach an amicable settlement that is beneficial to both the lender and the borrower. If the house is sold at this point then the both sides benefit. The lender avoids the huge expenses and waste of time associated with foreclosure and the borrower avoids a bad credit record.

In the second stage the house is notified for an auction or a sheriff’s sale. The prospective buyer does not usually get a chance to thoroughly inspect a foreclosed unit. Thus the condition of the house remains a big question mark and carries with it a risk. There may be undisclosed liens on the house or problems with the title deed. One has to sift through piles of papers in county records office to get the information – albeit without paying any fees.

If the auction falls through for lack of a buyer ready to offer the minimum offered price then the lender repossesses the house. Now the property is REO and this gives the buyers a good chance to snap up bargains because banks are offering heavy discounts and one can buy it directly from the owner – the bank. But even then one cannot totally ignore the fact that banks too want to march steal.