Foreclosures

Foreclosure Terms to Know

As-is - What you see is what you get with most lender-owned properties. This makes the home inspection doubly important.

Judicial Foreclosure - A court-ordered foreclosure.

Lease - Owners must comply with renters’ rights laws for rented single family and multi-unit buildings.

Loss Mitigation Department - The department at the lending institution that handles short sales, foreclosures and lender-owned real estate.

Notice of Sale - The legal notice published by the lender announcing the impending foreclosure, including the legal description of the property and the date, time and place of the sale.

Pre-Foreclosure - A property that is headed to foreclosure.

REO - Real estate owned -- by the lender.

Title Insurance - A policy that covers problems with the title – especially important when prior owners have been in financial distress.

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More Insider Information:

An inspection contingency may be your one and only chance to detect problems with the property and to cancel the deal.

You might move fast, but the lender probably will not. Allow a week or longer to move ahead with each step of the process.

Because lenders are overwhelmed with foreclosures, offers pile up in their systems. It is common for them to consider several offers at a time for each property. You will not know if your offer is one of many, or the only one, until you hear back that your offer was accepted or rejected.

The congestion in the foreclosure purchase system translates to lengthy delays. It is impossible to accurately predict when your offer might be accepted or, if it is accepted, when the purchase will close.

Bank delays and missed deadlines can cost you money if you must resend documents or postpone your closing. Be prepared with extra cash and patience.

How Foreclosures Are Priced

Foreclosures typically sell for about 30% less than the fair market value of similar, non-distressed properties, according to an MIT study.

With more foreclosures entering the system daily, lenders are motivated to price properties to sell quickly; however, ever-changing legal challenges and regulatory changes can stop or slow foreclosure sales and affect prices.

Some lenders deliberately under price their properties to elicit bidding wars. Research the likely value of the property in advance and decide how much you are willing to pay. Stick to this number so you aren’t caught up in the drama of a bidding war and consequently overpay.