Foreclosure is what happens when a buyer can no longer afford to pay on their home loan. When this happens, the property gets repossessed for the amount that could not be paid on the loan.
At the point of foreclosure the bank or financial institution has possession of the property and usually deals with it in one of four ways. Ownership is moved to the lender. Most of the time, when the lender takes the property their intent is to sell it in the open market.
This can happen by either making an agreement with the borrower in pre-foreclosure or they can buy it back at a public auction held by the county. Properties that are re-possessed are considered bank owned. Other times the borrower can get out of losing there home when the government gives them a certain allotted time to pay off the remainder of the loan. Another option for the buyer is that when they go into foreclosure they sell the home to a 3rd party buyer who then pays the remainder of the loan and it saves the borrower from getting the bad credit. One other option is that a home-buyer buys the home at a public auction.
By reading the previous paragraph you should have a general idea as to why it might be the best option to buy a home in foreclosure, if looking to buy a home. The percent of foreclosures are increasing nationwide as I’m typing this. Over a million foreclosures are expected to be on record this year (2008.)
Even though home prices are finally starting to come down a little, studies show buyers who buy in foreclosure usually purchase they’re home 25% cheaper than those who don’t buy in foreclosure.
Another possibility of buying a foreclosed home is that it is very possible to take the home and fix it up a bit, and re-sale it, or what they call home flipping. There is definitely money to be made in this. A person would definitely have to do they’re research on the home, and make sure they are making the right investment however.
They would have to figure how much it would take to not only buy the home but, to re-model, and then put it back on the market. There is definitely savings to be made with these situations. Either buying to keep, or buying to sell, if there are foreclosures in your area check them out. It is definitely worth it to see what they want out of the home.