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Are foreclosures a good investment?
They can be. A foreclosure property is a home that has been repossessed by the lender because the owners failed to pay the mortgage. Thousands of homes end up in foreclosure every year, and everyone is tuned-in to looking for that "great buy"! Economic conditions affect the number of foreclosures, too. Many people lose their homes due to job loss, credit problems, and/ or unexpected expenses.
It is wise to be cautious when considering a foreclosure. It is important to have the house thoroughly inspected and to be sure that any liens, undisclosed mortgages or court judgements are cleared or at least disclosed. And not every foreclosure is handled and purchased in the same manner as there are many types of foreclosures and pre-foreclosures, commonly called "short sales"! Just understand what you are getting into! We have the experience to help navigate buying a foreclosure if that is what you decide
HUD and VA foreclosures?
HUD foreclosures are FHA insured loans gone bad, down payments vary depending on whether the property is eligible for FHA insurance. If not, payments range from 5 to 20 percent and have to be bought with cash or conventional financing. But when the property is in good enough condition to be FHA-insured, the down payment can go much lower.
The U.S. Department of Veterans Affairs also offers foreclosure properties which can be purchased directly from VA often well below market value and with a down payment as low as 2 percent for owner-occupants. Investors may be required to pay up to 10 percent of the purchase price as a down payment. This is because the VA guarantees home loans and often ends up owning the property if the veteran defaults.
You should be aware that foreclosure properties are sold "as is", meaning limited repairs have been made but no structural or mechanical warranties are implied. HUD may also require a "repair escrow" before you can obtain an FHA loan on these properties.
You can only purchase a U.S. Department of Housing and Urban Development property through a licensed real estate broker, who places a bid on your behalf electronically and by certain deadlines. This is serious business and once an offer is made electronically, there is no turning back or changing your mind and the government does NOT take kindly to bidders doing so, as this could prevent another purchaser from obtaining the home and could be considered fraud.
Can I buy a foreclosure at the courthouse auction?
The process has many pitfalls. There is no financing; you need all cash right there. The title needs to be checked before the purchase or the e buyer could buy a seriously deficient title. The property's condition is not well known and an interior inspection of the property may not be possible before the sale. Buyers of these properties need to have "deep pockets" for expected expenses.
In addition, only (probate) and foreclosure sales are exempt from Texas disclosure laws. In both cases the law protects the seller (usually an heir or financial institution) who has recently acquired the property through adverse circumstances and may have little or no direct information about it.