1. Do all Foreclosures sell for less than market price?
No – Good deals are out there, but you can never assume that you’re getting a bargain simply because it’s a foreclosed property. Lenders and Banks that own foreclosed properties are usually prevented from accepting offers lower than appraised value, at least during the first several months that a home is on the market.
2. If I bid on a foreclosure auction do I acquire all the previous liens as well?
Yes – Before you bid on a foreclosed property at auction, make sure you know what debts go along with it. Conduct a title search to determine if any liens or fees are connected to the property. You may discover that you’d be taking on the previous owner’s s first mortgages, second mortgages or additional claims against the property and/or any tax liens.
3. Do foreclosed homes affect the other homes in the neighborhood?
Yes – Foreclosed properties can hurt the value of nearby properties and even have a negative effect on local crime rates, research shows. Even one foreclosure can decrease the value of the other homes within 1/8-mile by 1.44 percent. The goal is not getting into the mess in the first place.
4. Can I transfer title to someone else and avoid foreclosure?
No – This is a foreclosure rescue scam. As the number of foreclosures grows, so does foreclosure fraud. Home owners who are desperate to avoid foreclosure may be convinced by unscrupulous companies that promise “fast cash” and “equity funding.” As part of the agreement, the company says the owners can continue to live in the property and pay rent until they have the financial means to buy the home back from the company. However, once the company has the title, it sells the home to a third party, leaving the borrowers without a home or home equity.
5. Can I purchase a HUD home as long as I qualify?
Yes – Anyone who has the money or can qualify for the necessary amount of mortgage financing can purchase a HUD Home. HUD acquires its properties through the foreclosure of mortgages insured by the Federal Housing Administration. Many of these homes are sold “as is” and you want to be fully aware of what you are getting into before buying.
6. If I miss one payment will I go into foreclosure?
No – There typically needs to be at least 3 missed payments for something drastic to happen. Lenders are often willing to work out a solution other than foreclosure. Home owners should notify their lenders as soon as they know they won’t be able to make a mortgage payment.
7. Do lenders benefit at all when someone forecloses?
No – Foreclosures are costly and time consuming for lenders, too. It’s simply not in their best interest for a home owner to default on payments or lose a home to foreclosure. In fact, lenders would normally favor a short sale to a foreclosure because the bank’s financial loss will likely be far less. In a short sale, the lender often forgives some or all of the home owners’ debt that remains after the property is sold.
8. Once the bank takes back control of the property, am I out of financial burdens?
No – The IRS can still come back to bite you. Former home owners may still have to pay a tax on a portion of their mortgage loan after a foreclosure because the sale is technically considered income. NAR has been actively trying to eliminate this phantom tax since the mid-1990s. NAR argues that it’s unfair to impose tax on a phantom income when the seller lost the home to foreclosure and most likely doesn’t have money to pay the tax.