Your ability to view homes and have them inspected are different if you buy a home in foreclosure vs. pre-foreclosure.
If you're looking to break into the foreclosure market with your next home purchase, you may be wondering what the difference is between choosing to buy a home in foreclosure vs. pre-foreclosure. The truth is that there are some distinct reasons you might want to choose one over the other.
When you buy foreclosed homes, the homes have already gone through the entire foreclosure process. This means the previous homeowner was given a Notice of Default and the option to bring the home loan current within a specified period of time. Now the home is either for sale at a public auction or from the lender directly.
By contrast, when you buy pre-foreclosed homes, you will buy from a homeowner who wants to avoid foreclosure. Most homeowners who offer a pre-foreclosure sale want to recoup part of the equity that has built up in the home over the years. Or, it may be a short sale, which is a type of pre-foreclosure sale in which the lender agrees to accept an amount less than the mortgage balance because the home is worth less than the homeowner owes on it. If the lender has approved a short sale, you will make an offer and the lender must approve it.
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When you buy a home in foreclosure vs. pre-foreclosure, you may get a bigger discount from the lender, since most banks are very anxious to rid their books of foreclosures. This discount can be thousands of dollars more than it would be if you bought the home in pre-foreclosure. Homes sold in foreclosure also may have a clear title, whereas those in pre-foreclosure may have liens and other encumbrances. In both cases, you should research the property title before you make an offer or bid on a home.
Still, there are tradeoffs to consider when you buy a home in foreclosure vs. pre-foreclosure. Foreclosures often need repairs and are sold on in "as-is" condition. While some lenders may clean the property up, most will not invest any more money into a foreclosed property. Although a home sold in pre-foreclosure may also need repairs, you should be able to view the home and have it inspected before you buy it. When you buy foreclosed homes, you typically cannot enter the home and only sometimes can order an inspection.
When you want to buy homes in either foreclosure or pre-foreclosure, a professional real estate agent can help you sort good deals from poor investments. To find agents in the area where you want to buy, go to Reply! today.
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