As the market continues to heat up and inventory remains low, buyers are looking more at foreclosures and short sales. In today's article, we will talk about foreclosures.  A Foreclosure is when a bank reclaims possession of a home that was in default.  In NJ it is a judicial process which takes much longer than some other states. When a foreclosure is complete, there is no balance on the previous loan.  The process from foreclosure to listing it for sale is sometimes very lengthy. Banks each have their own process on how they will sell a home. Response to an offer is sometimes much longer than a normal sale. An example is when a sale of a foreclosure property by a lender is controlled by HUD.  The rules are strict and compliance is mandatory.  When the listing agent submits the offer, it will usually go first to the Asset Manager handling the sale.  The manager submits the offer for HUD approval, which sometimes takes a few days.  If HUD approves the offer, it is then sent to the actual seller (owner of the loan, not always the lender) for signature.  Sometimes, lenders who are offering a home that is foreclosed on in the market are only servicing the loan for the actual investor that owns the loan.  This is part of the reasons for what appears to be slow bank response.  Buyers interested in purchasing a foreclosure should always;

  • Make sure to do their due diligence about the home and understand as much as they can about the home and it's condition. Most foreclosure homes will not be able to have an inspection with utilities on and that needs to be understood. Do an OPRA (Open Public Records Act) request of the municipality to find out what permits may be outstanding and what work has been done.
  • Be aware of what financing may be available for the property. Normal FHA and VA loans may not be permitted on many foreclosures that have major deficiencies.
  • Make sure that your agent knows about the foreclosure process and can guide you properly.  Do not have false expectations about what may lie ahead.
  • Make sure that you are confident that the Reward will be worth the Risk.
  • Feel free to contact myself or any member of my team for more information.