Buying homes in foreclosure from a mortgage company: what to be aware of

Buying homes in foreclosure from a mortgage company can be a good way to get a bargain on your next home purchase. Mortgage broker foreclosures are sometimes offered at a steep discount because the lender is losing money while holding onto the property. However, there are some serious risks to buying mortgage company foreclosures, so make sure you are aware of these before you start bidding.

Here are some of the issues you should consider before buying a home in foreclosure from a mortgage company:

Liens and other loans – one risk to consider is the possibility that the lender who holds the property is not the only one with a lien on the home. In fact, the mortgage company may be managing the foreclosure on behalf of an original lender or even a mortgage servicing company. If you pursue a home in foreclosure, make sure the title is clear before you take possession. You do not want old tax debts or second mortgages to become your responsibility after you purchase your home.

Fierce competition – depending on the situation in your local market, you may find competition for properties in foreclosure to be quite fierce. Most of the time, you will not know what the other bids are and you may be guessing as to the best offer should be. You may have to make offers on several properties before having your bid accepted by the mortgage company. While this is not necessarily a problem, it can make the process frustrating, particularly if you have your heart set on a particular home.

Property condition – depending on the foreclosure laws in your state, mortgage company foreclosures may sit vacant for a long time, even several years. When buying homes in foreclosure from a mortgage company, you will need to be prepared to put some work into the home. Whenever possible, view the home before you finalize the sale and if you can, arrange to have a home inspection completed.

Clean financing – when you buy mortgage broker foreclosures, you will improve your odds by having your financing in place before you begin bidding. Mortgage company foreclosures are a problem for the lender, so they don't want to waste time on your offer if you can't get the money. Get preapproval from a bank or other lending institution.

Mortgage companies holding homes in foreclosure are motivated sellers. Reply! can help you take advantage of that motivation by connecting you to local real estate professionals.