Foreclosure Frequently Asked Questions

 

What is foreclosure?

Foreclosure is the legal process that banks and mortgage companies use to force the sale of your home to repay a debt; specifically, the mortgage on your home. Even if one payment is missed the lending institution can take the property back and then sell it to repay the money owed them; however, a foreclosure notice is typically not filed until three or four payments are missed.

 

What kinds of foreclosure properties are there?

There are three types of foreclosure properties:

  1. Pre-Foreclosure - The first legal action taken by the lender, where the borrower is given the opportunity to settle the debt. One of their options is to sell the property before it repossesses entirely. This is considered a negotiation or "Short Sale." There are various steps to this process and should be handled by an experienced real estate professional. The LaBell Team has specialists in this area. If you are in need of assistance with the short sale of your home, please contact The LaBell Team. We also have a Short Sale FAQ page for your reference.
  2. Auction - If the debt is not settled in Pre-Foreclosure, the property can go to auction. The LaBell Team also has experience with these types of real estate auctions. Please see our video which was featured on Good Morning America.
  3. Real-Estate Owned (REO) - If the property is not sold at an auction, the listing is returned to the lender and becomes a real estate owned property for sale. The lender or bank then assigns this property to a real estate agent in order to sell the property. The LaBell Team currently has a large volume of foreclosed homes listed and will be happy to assist you if you are looking for an REO home to purchase. 

How do lenders foreclose on property owners?

The lender files a judicial lawsuit or records a notice of default. There is a reinstatement period which varies in each state. It can be as short as 21 days or as long as 12 months. The reinstatement period gives the borrower the opportunity to resolve the property. This is known as the redemption period and is 6 months long in the state of Michigan.

 

What are the benefits of purchasing a foreclosed property?

Foreclosure homes are bought at discount prices, anywhere to 10% to 50% below market value. This makes a great financial opportunity for homeowners and for investors. The LaBell Team is trained to handle every type of buyer looking at a foreclosed property. This can vary from first time home-buyers to people looking to upgrade their homes and people looking to buy properties in bulk quantities for investment purposes.

 

Do I need a real estate broker to purchase foreclosure properties?

You need an experienced real estate broker who specializes in REO purchases. All banks market and sell homes through real estate agents locally near the home who can manage the property, comply with local ordinances and state laws, advise on values, handle offers and closing, and liability. Most banks are out of state so they cannot properly handle the sale. We highly recommend getting a trained real estate professional who is familiar in these types of transactions. Purchasing a foreclosed home is a much different process from purchasing a privately owned property and having an experienced agent can be the difference in getting the offer accepted or not, and in making sure you are not paying too much. Click here to contact our expert Buyer Agents.

 

What is Pre-Foreclosure?

Pre-Foreclosure is an action that  gives public notice of the foreclosure process on a property. It provides a potential buyer the first opportunity to purchase; and it gives the defaulting borrower time to sell or refinance. This is the time in which you could contact The LaBell Team to initiate a short sale on your home.

 

Can I buy Pre-Foreclosure properties?

During the Pre-Foreclosure stage, the property still belongs to the borrower. You can contact the borrower to get the physical and financial details of the property and to view the property. If the home is set up for a Short Sale, you would have to contact the Listing Agent of the property. We can do this for you also.Once you make the decision to buy the property, you must submit a written offer to the borrower or real estate agent. This is where it becomes important to have a real estate agent experienced in this area. There are many details that have to go into submitting the offer and an agent experienced in this area is the key to submitting a complete offer. Additionally, at this point, the foreclosure process must be ceased.

 

How much money do I need to purchase a pre-foreclosures property?

Usually, an initial deposit is expected ranging from $1000 to $5000. Confirmation of funds or a loan approval is also expected to be submitted with the offer. The real estate agent assisting you with the purchase could inform you of the exact amounts needed on a specific property.

 

What should I be aware of when buying Pre-Foreclosure properties?

There are two issues that you should be aware of when purchasing a Pre-Foreclosure:

  1. All of the debts on a foreclosed property will remain until the property is closed. All debts must be paid prior to closing the property. Be sure to have you agent check on issues such as back taxes and outstanding water bills. A potential buyer does not want to be unknowingly stuck with additional fees that they are not expecting.
  2. Ensure that you are aware of exactly who holds the title to the property and that they have agreed to the sale. This is the person/people that must sign the contract to the sale.

What is a foreclosure auction?

A foreclosure auction is a public sale in which properties are sold to the highest bidder. Investors and home-buyers are welcome to bid on properties. The LaBell Team is highly experienced in real estate auctions and will be happy to walk you through the entire process from registration to closing the deal for free. Foreclosure auctions can be found in various places including newspapers, through foreclosure attorneys, or real estate agents that list foreclosures. Additionally, many auction companies put up signs in the actual properties that are being auctioned. Just stopping to read the sign may point you in the right direction. Additionally, there are companies, such as Hudson & Marshall, which keep a continuous flow of auctions through the year. They may send notifications and keep a schedule posted on their website. Let our agents get you registered.

 

How much money do I need to buy properties at auctions?

The initial deposit is dependant on the auctioneer and seller. It is important to research the terms of the auction and required materials before attending the auction. The auctioneer will also give details as to the closing deadlines of the properties and the proof of funds if the amount is not paid in full on site. Many auction companies offer there guidelines on their websites or will allow people not bidding on properties to sit in on the auctions in order to become acquainted with the experience.

 

What are the advantages of buying foreclosure properties at auctions?

The greatest advantage for buying properties at auctions is the money that can be saved. Investors and home-buyers can purchase properties well below market value, which can result in a tremendous advantage. Additionally, if you are looking to purchase more than one property, these auctions are a good opportunity to be exposed to multiple properties in various locations.

 

What should I be aware of when buying foreclosure properties at auction?

There are a few very important things to note for foreclosed property auctions:

  • Arrive early and be prepared for quick transactions. The auctioneer will not stop in order for individuals to get situated or discuss their bids.
  • You must have cash or a cashier's check for the transaction. No personal checks or credit cards are allowed. In most cases, you will not be allowed to register without this proof of funds ahead of time.
  • All properties are as-is condition. The auctioneer or seller does not take responsibility for any repairs that need to be made to the home. It is extremely important, for this reason, that you see the inside of the home before bidding on it. This is a time in which it is important to contact a real estate agent in order for them to assist you in viewing the home.

My home is in foreclosure. Who can bid on my home in the auction?

Anyone but yourself can bid at the auction. Just remember to have everything that you need a head of time.

 

What happens if no one bids on my property?

The bank simply takes possession of your property, through eviction if necessary, and then hires a real estate agent to sell the property.

 

What is an REO property?

An REO property is referred to as a bank foreclosed property. It is a property that did not sell at auction and has been returned to the lender to sell in another manner. This is usually the point in which a real estate agent takes over the management of the property.

 

How do I go about buying an REO property?

The basic procedure begins with finding a home that you are interested in. Hire an agent who specializes in REO sales to provide you with a list of properties. Our agents are specialists. Often times, we have access to more detailed information that the general public. Additionally, while we do work for some of the banks selling foreclosed homes, we also have a full staff capable of servicing your needs and wants. We can help take you through the home, write the offer on the home, and close the deal once the offer is accepted.

 

How much money do I need to buy an REO property?

You will need an initial deposit which varies depending on the lender, the listing agent, and the value of the property. It can range from $1000 to $5000 and is submitted with the offer.

 

What should I be aware of when buying an REO property?

Prior to making an offer on the property, make sure that you have confirmation that you are able to secure a loan and that the property will be paid for. In some instances, you can lose your deposit if the sale does not close. Additionally, know what type of property you are purchasing. You need to be well aware if the home needs renovations, is ready to move in, or what other purpose it may be serving.

 

I don't want to overspend. How can I determine a home's market value?

The best way to determine a home's market value is to have it appraised by a professional. If you are in the area and can make arrangements with the trustee of the home or its current owner, you can hire an appraiser and visit the home to have it independently appraised. You can also make estimates based on the original sale price of the home before its owner defaulted, and by comparing with the current property values in the area. This will give you a good ball park figure to work with. Be sure to think about repair and improvement costs however, as they will have an impact on the amount you end up putting into the property.

 

How much should I pay for the home?

Once you've viewed the property, you need to consider the price, the condition of the property, and the surrounding neighborhood. Don't make your purchasing decision based on price alone. A very low price can mean that the property was abandoned for many years or was not kept in good condition by the previous owner. It may need extensive renovations that can be expensive and time-consuming. Buying a more expensive home that is in good condition rather than a bargain-basement home that has damage will save you money in the long run. You will also need to find out if there are any liens on the property or if the property has been affected by a bankruptcy. This information is not something you want to find out after you have already progressed through most of the buying process and can be a legal hassle to resolve. The LaBell Team can assist you in this area and have access to various sources of records.

 

What are HUD homes?

The Department of Housing and Urban Development is a federal agency that ensures home loans to homeowners through its Federal Housing Administration (FHA). When a property owner defaults on a HUD insured loan, HUD purchases the home through the lender and sells it to the public. A HUD home may be a single-family house, a town home, condominium, or other type of residence. The properties were deeded to HUD/FHA by mortgage companies who had foreclosed on FHA-insured mortgage loans. Now HUD must sell these homes - as quickly as possible at market value - in order to obtain the maximum financial return on its mortgage insurance funds.

 

How can I purchase a HUD home?

HUD homes are purchases through a HUD approved real estate agent. You must have a real estate agent to represent you. The LaBell Team can help you in this area. Your agent submits a written bid during the bidding process. If you are the winning bidder, your agent will be notified within 48 hours to submit a contract of sale. Please contact us to help you purchase a HUD home.

 

How much money do I need to buy a HUD home?

A HUD home usually requires a deposit of $500 to $1000 which is submitted with the written offer. You then have up to 60 days to complete the purchase. A licensed real estate agent is familiar with there tight deadlines and can guide you through a smooth process.

 

Are HUD homes meant for low income people?

HUD homes come in a variety of price ranges, though most are affordably priced, making them accessible to low and moderate income Americans. The LaBell Team is not at all uncomfortable working with in low income situations and neighborhoods. We are here to help. We abide by all fair housing practices and treat our customers with the respect they deserve.

 

What are the income requirements for HUD homes?

If you make a cash purchase, there are no income requirements. Otherwise, you must be able to qualify for a particular type of mortgage financing based on established mortgage lending criteria. We have lenders that we work with on a daily basis and would be happy to help get you approved.

 

What is a Veterans Affairs (VA) foreclosure property?

The Department of Veterans Affairs is a Federal Agency that guarantees mortgages to homeowners that have served in the Military. When a property owner defaults on a loan, the VA buys the property from the lender and offers them for sale to the public through local real estate agents.

 

How can I purchase a VA foreclosure property?

To purchase a VA property, you need to submit an offer through a real estate agent. The agent submits the offer via mail, fax or email. If your offer has been accepted, your agent will be notified. If you need an agent to submit an offer for you, please contact The LaBell Team and we will be happy to assist you.

 

What should I be aware of when buying a VA foreclosure property?

If you are planning to purchase a VA home, you must be eligible for a VA loan:

  • You cannot obtain a conventional home loan
  • You must be planning on living in the home
  • Rental properties are not eligible

How much money do I need to buy a VA foreclosure property?

A VA loan usually requires a deposit anywhere from $100 to 5% of the total sales price. This is dependant on the property and the real estate agent that you are working with can help you determine this amount specifically.

 

What are Fannie Mae properties?

The Federal Nation Mortgage Association is commonly known as Fannie Mae. Fannie Mae foreclosure properties have been purchased from lenders and are offered for sale to the public through local real estate agents. We have a large inventory of Fannie Mae properties and will be happy to assist you in searching for one that suits your needs.

 

How can I buy a Fannie Mae property?

An offer must be submitted to Fannie Mae through a real estate agent before the given deadline. After the deadline date, all offers are reviewed and the highest bidder becomes the purchaser of the property. At this point, your real estate agent can walk you through the remainder of the transaction, all the way to the closing.

 

How much money do I need to purchase a Fannie Mae property?

A down payment of 3% to 5% is usually required. Your real estate agent can give you the exact details. If you need someone to assist you in purchasing a Fannie Mae property, please contact The LaBell Team.

 

When purchasing a Fannie Mae property, what should I be aware of?

A thorough investigation of the property should be made prior to submitting an offer. Fannie Mae makes repairs to the property, but does not guarantee these repairs. The property is sold as-is. This is why it is important for one of our agent's to walk through the home with you. Additionally, we can recommend companies for private inspections and appraisals.