For a buyer, making a deal
with a seller during the pre-foreclosure phase can
offer some advantages compared to other foreclosure
or short sale scenarios. A pre-foreclosure deal is
just like any other typical sale, where you can tour
and inspect the property, make
an offer, negotiate the
price (at long as it stays at or above the amount of
the mortgage balance), and schedule a closing in a
reasonable amount of time.
Buying a fully-foreclosed home
from the bank has pros and cons. The lender can sell
the house an auction or in a regular real estate
sale. The auction process works exactly how you
might imagine it would: The lender sets the minimum
bid (often, the amount left unpaid from the
mortgage), and if you submit the winning bid and
abide by all other terms of the sale, you can buy
the property. However, you may not have the
opportunity to view or inspect
the property, which means
youíll be taking a risk. Also, you often need to
come up with the money for the purchase quickly, and
may not have a chance to secure financing.
If the home is sold as a
bank-owned property (sometimes known as REO, or
real-estate owned properties) on the market, the
process begins much like any other real estate sale.
But the borrower is out of the picture at this
point, so you or your agent will deal with the
lender, or a real
estate agent acting on
their behalf. The lender is generally motivated to
make a deal, and may even offer attractive financing
terms as an extra incentive. However, as some
foreclosures are owned by large, busy lenders, the
process may be slow-moving as negotiations and other
communications take days or weeks.
What foreclosures and short
sales do have in common are that they can both be
great ways to get a good deal on a house.
at Bankrate created a guide about the loan
pre-approval process that includes a checklist of
all the items and documentation needed to ensure
prompt home finance approval.