Click
on thisThis Foreclosure Information page will give you a brief description of the various types of foreclosed homes that would be considered the most beneficial purchase for a buyer. These are also good examples of the best buys in the real estate market today along with either little money required to close or none.
CLICK on the subject of interest for more information.
A VA home is a previously foreclosed home that originally had a VA loan guaranteeing its repayment. The Veterans Administration provides VA loans to encourage and provide favorable financing to veterans. After a VA loan has foreclosed, because of nonpayment of the loan or any other default by the buyer, then the mortgage company holding the loan contacts VA to trade the guaranteed home for the funds to pay off the loan obligation. This exchange now creates the VA owned home.
These foreclosed properties are listed by local listing agents through the MLS. Properties for sale may also be viewed on the VA.gov site.
Since you will not be able to purchase a VA home without a real estate agent, we will get you started on the right path. VA requires special forms that sometimes look like they were originated in Mars, but don’t worry, we know how to fill them out and process them for you.
VA offers an incredible loan benefit to non veteran buyers called the VA Vendee loan. This loan is easy to get, is usually 0 down for a buyer who is going to live in the property they are purchasing, and the interest rate is deliciously low. You usually can’t beat it.
HUD, or the Department of Housing & Urban Development, is great about promoting home ownership. They provide low interest rate loans, called FHA loans, with low down payments to afford buyers who want to own a home an opportunity to afford it.
HUD homes result in much the same way as VA homes. The loan is guaranteed against default and if a homeowner stops making their mortgage payment, the bank forecloses on the home, then the property is exchanged for the defaulted loan payoff, and it becomes a HUD home.
Almost anyone can buy a HUD home as long as they qualify for a loan and have a certified HUD agent. Don’t worry too much about that as we have access to all of the certified agents across the country. HUD always favors the buyer who will reside in the home rather than an investor. These homes are sold through a bidding process, but don’t worry we, we’ll help you understand the process. Through the purchase process, these HUD homes are offered first to owner-occupants and whatever is left over is eventually offered to investors.
HUD's Good Neighbor Next Door Sales Program gives Law enforcement officers, pre-Kindergarten through 12th grade teachers and firefighters/emergency medical technicians the opportunity to purchase specially designated homes at a 50% discount from the list price. The homes are usually located in areas that HUD designates as needing revitalization. In return you must commit to live in the property for 36 months.
Click here for a list of HUD homes.
Now we are going to discuss distressed sales, which include all sales whereby the seller is under some duress that would cause someone to sell a property for a price under market value. Actually, all sellers are under some pressure to sell their home. If you have ever been a seller of a home, as we have been many times, you most likely felt some pressure to get your home sold. But imagine that you know someone that cannot make next month’s payment on their home and they're faced with the threat of foreclosure. Maybe their house has a lot of equity and they need to tap into that equity quickly for a medical reason or just to survive because of the loss of a job.
In these situations, people in general will be willing to sacrifice some of the equity in their home for a quick sale. So if you are in a position to settle quickly, you become their hero and the seller rewards you with instant equity. It is a win-win situation. There are also situations where the seller needs to sell but does not have any equity in the home to trade for a quick sale. In this situation, the seller will have to bring money to the settlement table to satisfy outstanding loans on the property. Of course, if a seller is having trouble keeping up with mortgage payments or is falling behind, they are certainly not going to be in a position to bring any money to settlement. The seller will have to get permission from the lender to reduce the amount owed, which lenders will approve, if it is in their best interest. This type of sale is called a short sale. So, let’s talk about short sales? A short sale is where the lender agrees to take a lower pay off to satisfy the note. A short sale will only work if the lender is convinced that the market value of the property is lower than the amount owed and that the owners are in financial distress/hardship. The homeowner has to sell the property for less than the outstanding balance of the loan, and in turn the lender accepts that discounted amount as payment in full and will release the property to another buyer. However, some payoffs are not fully satisfied and it is usually dependent on the original loan and the type of borrower. Since the discounted payoff would affect the lender, they would become participants in the contractual approval process prior to a home sale contract being ratified.
These types of sales are found in the MLS, word of mouth, and sometimes advertised for sale by owner. However, to protect yourself in these difficult transactions, you must have a Short Sale Specialist (CSP) Real Estate Agent.
Lenders acquire homes through the foreclosure process. These properties are referred to as REO properties. REO stands for “Real estate owned”. Since the property was acquired through the foreclosure process, it usually means that investors did not find the property to be an attractive purchase at the amount owed through resale prior to the foreclosure sale or at the Trustee Sale at the courthouse. Regardless if the property is worth more or less than the amount owed to the lender; the lender will try to sell it for the best reduced price in the shortest amount of time. REO properties are classified as a distress property because all lenders tend to sell their REO properties “as-is”. Very few lenders will back repairs or pretty up a property prior to putting it up for sale through a real estate company. Any property sold “as-is” can be expected to sell at a good discount. In light of the current market conditions, there are an unprecedented number of foreclosures, and lenders are being forced to cut prices in order to move homes off their books more quickly, this is a great advantage for today’s buyer. If there was ever a time to buy an REO property, the time is now. We have witnessed lenders slashing property prices by $50,000 or 20-25% of the previous list price. This is happening all over and in some areas it is artificially and temporarily suppressing prices.
We recently purchased an REO property that 18 months earlier sold for over $314,000 and we bought it for $165,000…Wow!
Other types of distressed properties include Trustee Sales and even homeowners that are defaulting on their mortgages. We’ll talk about that next.
Anyone who wants to purchase a home below market value can purchase a home at a trustee sale. This would include investors and owner occupants. Investors should add trustee sales to their arsenal for making money in real estate. Any owner occupant would have an advantage over an investor. An owner occupant is always willing to bid more than an investor because an owner occupant is not worried about holding costs, costs to resell and profit as an investor. So trustee sales are great for prospective home owners.
The majority of trustee sales are the result of the borrower failing to maintain payments on the loan. If a borrower has stopped making payments, the lender will initiate actions to get the borrower to bring the loan current. The borrower will receive notice to bring the loan current or attempt to make other arrangements with the lender. If neither alternative is successful, then the lender will send a written notice of acceleration and give the borrower a fairly short period of time to cure the default. If the borrower does not cure the default within the allotted time, then the lender will notify the trustee. The trustee now gives notice to the borrower and will give public notice usually by advertising in a newspaper having general circulation in the area the property is located. In Virginia, the trustee must advertise no less than once a day for three days. A copy of the advertisement must be mailed to the homeowner no less then fourteen days prior to the trustee sale. The trustee cannot sell any earlier then eight days after the first advertisement and no later than thirty days after the last advertisement. The borrowers’ deed of trust will outline the process the trustee is to follow. If the deed of trust is silent in this regard then Virginia requires an ad to be run once a week for four successive weeks. If the property is sold to someone other than the lender, settlement is required in a very short timeframe, usually ten to twenty days. As you can see, this can be a very quick process.
That ends our summary of the most beneficial and attainable types of pre foreclosures and Foreclosure for the real estate buyer that will be purchasing a home to live in. The following is a list of likely loan types that will be most advantageous for Buyers today:
Low to No money down (not necessarily great for homes with conditions)
VHDA- Virginia Housing Development Authority
FHA- An extension of the Department of Housing and Urban Development (HUD)
RD- Rural Development
VA- Veterans Administration. Eligibility requirement for an original VA loan; however, a VA Vendee loan for foreclosures is still 0 down but the buyer has to pay their closing costs.
Since these loan programs as well as the requirements for loans, qualifications, down payments, 0 down, closing costs, etc. are ever changing, please contact us so we can get you in touch with the right loan specialist for you. Loans are a very personal part of buying a home and there are as many loan specialists as homes.
We know how to help you!
