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pre forclosure properties

Hello I have been looking to buy a home I am trying to understand how the pre forclosure properties work if they are auctioned or do they just become forclosure properties there are a ggod bit of them on the street I live on now which is Scott Street.
  • March 03 2014 - Washington Village
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Answers (1)

I think the first question should be how you plan to purchase the home. Are you using cash or a loan? If you are using a loan, what type of loan? Often buyers want to purchase an "inexpensive" home, which they interpret a foreclosure home to be. This is not always the case, however, and not all loans will necessarily work with a foreclosure. For example, with an FHA loan, which requires 3.5% down, the appraiser, who will follow FHA and lender guidelines, will likely require things such as kitchen appliances, working heat and hot water, etc. If these things are not in place, the selling bank will not likely put them in, and that could be a problem for your loan. You might be better off to develop a strategy that includes the specifics you are looking for in your home, and then discussing your purchase options with a lender. They can get you preapproved to make the process smoother. You should consider your wish list for your home and then look at a variety of homes, including foreclosures. Some may be in great shape and others may not. You may find a "standard" sale property (non-foreclosure) that is just what you're looking for and at the right price.

Pre-foreclosure can be a home that is awaiting the formal process of foreclosure, or it could be a home that is a short sale, one in which the seller is attempting to sell for less than they owe on the property. Short sales required lender approval after you've made a deal with the seller. In any event, some properties sell as auctions, and some are just listed for sale with an agent.

There are also homes that are owned by Freddie Mac and Fannie Mae, which are homes that are being sold by the government. These homes are sold sometimes as investment properties, and sometimes they are sold to those who want to move in to the house. Sometimes they are in good shape and can qualify for FHA and other programs, and sometimes you may need a specialty rehab loan. Freddie and Fannie have programs known as HomePath and HomeSteps which allow buyers to purchase the home with special financing opportunities that may include low downpayment, cash back incentives, and no monthly mortgage insurance. Sometimes they also offer other perks such as free one year home warranty, buyer's agent bonus, etc.

It's a little complicated, so it's probably best to do some more research and start slowly as you move forward. Of course, it's always best to use a real estate professional who can assist you.

Best wishes!

Mike
  • March 03 2014
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