A guide to the art of buying a foreclosure sale. There is a great deal of mythology that surrounds a foreclosure sale. Many buyers do not understand what a foreclosure is sale and the mechanics involved with purchasing a foreclosed property.
The first phase of a foreclosure sale begins when a home owner defaults on a mortgage payment. (There may be other circumstances, but this is the normal way to default). The property is then advertised for sale at an auction. Typically this auction takes place on the court house steps. At this first auction any potential buyer is bidding against the bank and must pay cash or have financing already committed before bidding. Usually, the bank or the mortgage insurance company purchases the home at this auction.
In the second phase the bank, turns the property over to the mortgage insurance company or evaluates the condition of the home.
We normally do not get involved with the court house auctions because:
 | Most buyers cannot pay cash for a home. |
| Most properties sold this way cannot be inspected or even viewed. |
| The sale cannot be contingent upon financing. |
In the third phase, the bank, mortgage insurance company or government agency places the property on the market. we can then show the properties and publish a list of homes available.
Questions and Answers about Foreclosures
| How big are the discounts on foreclosure sales? - The discounts on a foreclosure sale depends on the market demand for homes. In Howard County, where the market is very strong, the discounts tend to be somewhat small. In Baltimore Count the discounts tend to be larger. |
| I have no cash, can I buy a foreclosure sale? - On occasion special financing is available, but normally the buyer is expected to pay their own closing costs. |
| Can I buy a foreclosure sale with bad credit? - Financing on foreclosure sales can be very liberal, but they still want to have a reasonable chance for repayment. |
| Can I purchase a vacant lot in foreclosure? - We rarely see vacant land for sale in foreclosure. Normally lot loans require 25% down. Most people will not walk away from a property with that amount of equity invested. |
In Summary:
Buying a property in foreclosure is similar to buying canned goods in the dented goods section of the supermarket. You need to see past the cosmetic problems of a foreclosed property. You usually can purchase a foreclosure at a discount, but the properties are sold in as-is condition.
If you have specific needs (garage, large lot, etc) the odds are small of finding it in foreclosure. The more flexible you, are the more opportunities arise.
We hope that we haven't scared you off. Despite all our cautions great houses at great prices do come along.
This is a complex but rewarding way to purchase a home. We welcome your questions. Please contact us at gofigure@clark.net or call us (410)461-9730.