Re: Buying a Foreclosed Home
I've been selling real estate for 12 + years, buying a foreclosed home is no different than buying an owner occupied home. As long as you do your due diligence with title insurance/Abstract, and inspections. If you're securing a mortgage, then the lender will required title insurance. Which can prevent a financial loss should any title issues arise from the foreclosure or any previous owner for that matter, there are some unlikely exceptions.
If the home was foreclosed and the borrower had mortgage insurance the bank will be made whole. Often times VA and FHA just pay-off the note to the lending institution, take possession and the sell the home. With FHA you pay a upfront mortgage insurance fee and a monthly mortgage insurance (MIP)...with VA they charge and upfront 'funding fee'; however, they guarantee the loan not insure it. If you have a conventional mortgage and put less than 20% down (some lenders require 25%) you're more than likely going to be required to carry Private Mortgage Insurance (PMI). If you borrowed 100% of the home purchase price or re-financed 100% interest and had a 80/20 (80% in the First mortgage and 20% in the Second) or 90/10 or 80/10/10, etc... then mortgage insurance was not required because the risk for defaulting on the first was lowered because in the event of a default/foreclosure there was most likely money to pay-off the first (First Lien Holder) and the second became basically a un-secured loan. etc...etc...etc...
Foreclosures are actually good for the economy. It frees up capital for the banks which allows them to loan again at prevailing rates.
So, in my opinion, buying a foreclosed home can often be financially solid investment, typically you're getting them below market value. Some are in move-in condition, while others are in need of some repairs/deferred maintenance? You're not discounting the previous owners, as your not the reason the home foreclosed, you're just a person/family in need of a house, it's not like you purchasing it is the final straw of the foreclosure?
Short sales (for explanation sake it's an over encumbered property...although, not always and the seller(s) is/are asking their bank to accept less than pay-off amount due to their personal financially situation, lower property values, and/or distressed conditions. Often times the seller's are behind on payments, although, not always. The benefit of buying a short sale, you'll actually be relieving the seller of their financial obligation to their lender (although, often the bank request a promissory note for some portion of the forgiven debt...varies?) Short Sales can take in excess of 9 months, but most can be finalized in about 3 months. Most are purchased well below market value (+15%) at least locally that's the trend. The bank gets a good portion of the amount owed. There are no absolutes in dealing with banks and short sales. But it's about as close as a foreclosure can get to being a win-win-win?!
Just my $.02...
