General Questions

What are real estate foreclosures?

A property becomes a foreclosure when a homeowner defaults on their loan payments, and as a result, the mortgage lender acquires the property. The lender gains control of the property and uses it as collateral for when the homeowner is behind on their payments. Lenders should be mindful of state laws when working with foreclosures, as laws vary from state to state. There are several reasons why owners default on loan payments, including loss of employment, divorce, and the death of a spouse. In an effort to remedy the situation of missed payments with the homeowner, the lender will go through a process called loss mitigation. If this is not successful, the lender will initiate the foreclosure process.

What are the benefits of buying a foreclosure?

While foreclosures often carry a bad reputation, they can also serve as excellent real estate bargain opportunities for homebuyers looking to purchase properties at discount prices. The prices of these properties are often listed significantly under market value. The reason why foreclosures are priced so low is because sellers of foreclosed properties are typically looking to sell their home as quickly as possible before they occur any additional losses.

What are the different types of foreclosure properties?

There are three primary stages in the foreclosure process. At each stage, the property is considered a specific type of property that a new person can buy.

  • Pre-foreclosures:
    As the earliest stage in the foreclosure process, pre-foreclosures occur when the borrowers default on one or more of their mortgage payments. In many cases, pre-foreclosure homes are still occupied by the homeowners because the property has not been repossessed and sold at auction. This means a home can be considered a pre-foreclosure and not be for sale.
  • Auction:
    An auction property will be posted for public sale to obtain the highest possible price on the property. When the borrower defaults on the loan, a foreclosure auction will help a lender mitigate losses. This stage happens after the lender legally takes ownership of the property.
  • Real Estate Owned (REO):
    Banks and other lenders will seize a property when people fail to pay their mortgage payments. From there, banks will try to recoup some of the investment by attempting to sell it at public auction. However, sometimes a home will not sell even when it is heavily discounted. When this occurs, the property becomes real estate owned, otherwise known as an ‘REO’ property.

How do lenders foreclose on property owners?

Lenders must obey the state foreclosure laws of the state in which the property is located. Foreclosure procedures are categorized into one of two types; judicial or non-judicial foreclosures.

  • Judicial:
    Many states require mortgages to document property ownership. In those states, the lender is required to file a lawsuit before they can foreclose on the property. Once filed, the court will try to determine the details of the default by examining the document and listening to hearings provided by both the homeowner and the lender. At this court hearing, the homeowner will also have a chance to negotiate and prevent a foreclosure ruling. The court will consider all matters and enter in a judgement to determine whether or there will be a foreclosure sale.
  • Non-Judicial: Because non-judicial foreclosures do not require a court case, they are dictated by a significantly quicker process. These foreclosures can often be completed in less than 30 days. The court system is barley involved throughout this process, and in many cases, the foreclosure is handled by a trustee.

Can people make money investing in foreclosures?

Yes, real estate investors will often take advantage of foreclosures because of their ability to be purchased under market value. Buying a foreclosure is an excellent way to obtain a significant amount of equity once you purchase the home. Foreclosures are often targeted by people looking to buy and flip homes for a profit. Many landlords also look to buy foreclosures to rent them out.

How do I get started with foreclosure investing?

If you are eager to get started in foreclosure investing, you must first learn the process and all that it entails. At USHUD.com, you will find a wealth of information such as industry trends and foreclosure property listings. Our user-friendly database that will help you find some of the best foreclosure deals on the market today.

Is the assistance of a Realtor® required to buy foreclosure properties?

A home buyer does not need to utilize the services of a realtor when purchasing a foreclosure property. The reason why home buyers often rely on realtors when buying a foreclosure is that it is typically a complex process. It does not matter if it is an auction, an REO, preforeclosure, or foreclosure property, it is essential to have an experienced and knowledgeable professional to guide you through the process. A professional will help you to find foreclosures on the market, as well as close deals.

How do I find cash to buy foreclosures?

There are a few ways in which you can gain the capital necessary for investing in a foreclosure. In addition to conventional financing, there options like opting for a line of credit or partnering with an investor. In terms of conventional financing, you can request it from your local commercial bank or a mortgage broker. If you decide to add a partner, you can look for anyone who would be willing to provide money in exchange for a percentage of the profits when the property is resold. Partners can be anyone from friends to business partners and relatives.

What should I be aware of in buying foreclosures?

One of the most important things to keep in mind when purchasing a foreclosure is that they are sold "as is" condition. Homebuyers who never have purchased a foreclosure need to understand this and be prepared to make repairs on the property. In many cases, a foreclosed home has been neglected. It is also important to note that the lender is not required to make property repairs.


Preforeclosures

What is a preforeclosure?

A home becomes a pre-foreclosure when the homeowner defaults on their loan payments, and the lender initiates the foreclosure procedure. It is an early stage of the foreclosure process, and in many cases, the owners are still living in the home since it has yet to be repossessed and sold at auction.

How do I find pre-foreclosures?

A homebuyer can find pre-foreclosure in newspapers, online databases, and by contacting foreclosure attorneys. An even better option would be to use USHUD.com, a site which was developed to provide user-friendly content to help homebuyers. It will provide you valuable information on the various types of properties and detailed explanations of each stage in the foreclosure process.

How do I buy pre-foreclosures?

To purchase a foreclosure, one must first submit a written contract to the owners to buy the property. Since they are still technically the owners during the pre-foreclosure stage, you need to contact them directly via mail, phone, or meeting with them in-person. During this step, it is important to ask questions about the conditions of the property, as well as any financial information in regards to the property (i.e any loan balances or liens). You need to gather as much information that you can to determine if the foreclosure is worth investing your time and money into. If you are considering entering this deal with a partner (or multiple partners), now is the time to discuss the logistics with them. If you decide it is a good deal, you can move forward by submitting a written contract to the owners. After the buyer and seller have negotiated the contract, you must inform the foreclosure attorney to stop the foreclosure process.

How much cash do I need?

A buyer does generally does not need a significant amount of cash upfront to purchase a pre-foreclosure. However, even though the earnest money deposit is typically minimal, the homebuyer will eventually need to pay the remaining debt on the preforeclosure.  

What should I keep in mind?

When it comes to buying a pre-foreclosure, you will need to be mindful of the fact that only the people who appear on the title can sell the home. Before you spend time and effort into putting together a deal, you must negotiate with all the owners and they all have to agree to sell before any transaction can be made. With this, it is imperative to understand that all existing debt, known as subordinate debt, remains on the property until it is sold at a foreclosure auction. This includes any existing mortgages, tax liens, trusts, judgments, and assessments. If any of these debts remain, they must be paid. It is the responsibility of the buyer to learn about any existing debts before purchasing a property.


Real Estate Owned (REOs)

What is an REO?

Banks and other lenders will seize a property when the homeowner fails to pay their mortgage payments. From there, banks will try to recoup some of their invest by attempting to sell the property at a public auction. However, a home may even fail to sell even when it is heavily discounted. When such circumstances arise, the property becomes an REO property.

How do I find REOs?

There are a few ways to find REO properties. For instance, this can be done by keeping track of the foreclosure process and waiting until after a home fails to sell at auction to become an REO. Another option would be to simply contact real estate agents or brokers in the area to see what is available for sale.

How do I buy REOs?

A home buyer or investor can buy an REO by submitting a written contract to the lender. It is the responsibility of the buyer to find all that they can about the pre-foreclosure before they submit their official offer.

How much cash do I need?

In most cases, lenders will request an earnest money deposit to be paired with the offer. This sum of money will vary and be dependent on the value of the home and the lenders asking price.

What should I keep in mind?

Loan policies vary from one REO owner to the next. It is imperative that you communicate with the REO owner so that you are clear on the financing terms, as well as the loan policies. For example, your REO lender may offer financing options if you are an investor.


HUD Repossessions

What is a HUD property?

The acronym HUD stands for The U.S Department of Housing and Urban Development. This federal agency insures mortgages to homeowners through the Federal Housing Administration. Once the HUD acquires properties from lenders who have foreclosed on FHA-insured mortgages, they can place them for sale to the public.

How do I find HUD properties?

If you are looking to research properties, as well as learn more about HUD properties, Hudhomes.com is the best place. You may also learn about these properties from marketing companies contracted by HUD. Additionally, you can reach out to local realtors who are registered with HUD in your areas.

How do I buy HUD properties?

All bids on HUD properties must be submitted through a registered real estate broker during the bid period. Generally, your agent will submit your bid electronically. Once the offer period has ended, the winning bidder will be notified. Their agent will then need to submit their signed sales contract within 48 hours.

How much cash do I need?

For properties that sell for $50,000 or less, a buyer will need an earnest money deposit of at least $500. This sum of money will be submitted to the closing agent after your bid wins.

Can I buy HUD properties for $1?

A consumer cannot purchase Hud Properties for a single dollar. While these properties are not always sold to the public, HUD offers some of its properties to registered state and local governments at this price.

What should I keep in mind?

The owners or occupants of a HUD property listing have the first opportunity to submit a bid on the home before it is available for sale to everyone. If the property does not sell in this window, bidding will be opened for anyone to purchase the property. It is also important to note that the contract package contains both the pre-qualification letter and the earnest money deposit.


VA Repossessions

What is a VA property?

The U.S Departments of Veterans Affairs (VA) is a federal agency that helps those homeowners who have served in the military. After the VA obtains properties from lenders who have foreclosed on VA-guaranteed mortgages, these properties are placed for sale.

How do I find VA properties?

Information about VA properties is always available on the VA website. In order to submit an offer for a VA property, you need to contact a real estate agent who is registered by the VA. On the VA website, you can find the names of real estate agents who can help you with the VA properties in the areas you are looking to buy.

How do I buy VA properties?

In order to purchase a VA Property, an individual must submit their offer on VA forms to a registered real estate agent. These forms can be accessed on the VA website.

How much cash do I need?

An interested buyer must submit an earnest money deposit of $100 to 5% of the property’s purchase price. Also, all procedures set by the VA must be adhered to in the process.

What should I keep in mind?

It is important to note that an individual can only obtain a VA loan if they qualify based on their military service. A person can purchase a VA home with conventional and other types of financing to purchase a VA property.


Fannie Mae Repossessions

What is a Fannie Mae property?

Fannie Mae is short for the Federal National Mortgage Association (FNMA). Established by the government, Fannie Mae was created to purchase FHA and various types of mortgages to combine them and make them available for sale on the secondary market. They are referred to as "mortgage-backed securities."

How do I find Fannie Mae properties?

In addition to contacting local real estate brokerages, you can find Fannie Mae properties on their website and are listed in local Multiple Listing Systems. That can contact the real estate brokerages to get in touch with agents who sell Fannie Mae properties.

How do I buy Fannie Mae properties?

Fannie Mae sells its properties only to real estate agents. In order for an interested buyer to place an offer on a Fannie Mae property, they must present the offer to the agent who will then submit the offer to Fannie Mae for consideration. From there, Fannie Mae will either accept, reject, or will counter the offer.

How much cash do I need?

Fannie Mae requires an earnest money deposit with its property purchases. In most cases, the down payments fall between 3-5% of the property’s purchase price.

What should I keep in mind?

Homebuyers need to understand that Fannie Mae does not guarantee that there will be any repairs to a property. In some case, Fannie Mae will complete some work on its properties; however, they are always sold "as is" condition.


Auction Properties

What is an auction property?

An auction property is one that is soon to be auctioned off at a public auction or one has already been sold at one. These auctions are typically open to the public and properties are sold only to the highest bidder.

How do I find auction properties?

At USHUD.com, you can peruse our database to learn about the auction properties in the areas you are searching in. In many cases, homebuyers will initially work with homeowners during the pre-closure process. However, if they are unable to successfully reach a deal, the buyers will attempt to purchase the property again if it goes to auction.

How do I buy properties at auction?

In order to purchase an auction property, you must be qualified either at or above the set price. The minimum bid price on an auction property include legal costs, as well as the unpaid debts that are owed to the foreclosing lender. An interested buyer will need to demonstrate to the attorney that you are qualified to purchase the property. The attorney will need to see the earnest money deposits in order to qualify bidders. If you are the winning bidder, you will need to supply either a cashier’s or certified check that is non-refundable to secure the purchase of the property.

How much cash do I need?

The amount of cash that you need will ultimately be dependent on the seller. A foreclosure attorney will be able to determine the percentage of the minimum bid price that is required. If you win the auction, you will have to pay the deposit after the conclusion of the auction.

How can I prepare for an auction?

When preparing for an auction, a buyer must come prepared. With this, it is essential to bring either a cashier’s check or cash in case you are the winning bidder. Next, an interested buyer should arrive with a bidding strategy to stay competitive during the auction. Home auctions often bring out several interested buyers, so it is important to plan to face some competition around you. Another way to stay ahead of the competition is to arrive at an auction early to speak with the attorney and ask any questions that you may have about the property.

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