Buying a foreclosed home
Understand how foreclosure works before you make an offer.
Foreclosures
In the market for a foreclosed home? You're in luck.
A foreclosed home might be in move-in condition, or it might be a home you need to take down to the studs. Either way, a foreclosed home can be a great investment.
What is a foreclosure?
A foreclosure is a home that is owned by the lien holder (the lender) and is up for sale with that lender.
What it means
What does foreclosure mean?
The lender owns the home
A foreclosure takes place when a home is seized and put up for sale by the lender. When you see a home listed as foreclosed, it means that it's owned by the lender.
It starts with a lien
Every mortgage contract has a lien on the property. A lien allows the lender to take control of the house if the homeowner stops making mortgage payments. Foreclosures are typically the result of a homeowner being unable to keep up with their mortgage.
It's a different kind of purchase
Buying a foreclosed home is a little different from buying a house owned by a homeowner.
The process
How does foreclosure work?
Foreclosure is the process by which a lender takes possession of a home when a homeowner fails to make their mortgage payments. It has several stages, and understanding them matters when you're considering buying a foreclosure.
Payment default and notice of default
Payment default occurs after the homeowner has missed at least one payment. After several months of missed payments, the entire mortgage can default, which typically initiates the preforeclosure stage. A notice of default is usually sent by the lender after 90 days of missed payments. Foreclosure referral timelines vary based on the contract agreement and the policies of the lender and investor in the mortgage. A homeowner is often given time to work out a new payment plan with the lender before the home is foreclosed and put up for sale.
Notice of trustee's sale
The lender must record the impending sale with the county and publish news of it in the local paper. This is one way of finding a foreclosure to buy, although an online search will generally be more effective.
Trustee's sale
The lender attempts to sell the property at public auction.
Real estate-owned (REO)
If the property does not sell at auction, the bank becomes the owner and will then attempt to sell the property. For most people looking to buy a foreclosed home, especially those purchasing with a VA loan, this is the stage at which they will buy.
Ready to look at foreclosures?
The Cooper Home Team can help you find, evaluate, and make a smart offer on a foreclosed home in the Colorado Springs area.