Foreclosure Auctions

• When the homeowner defaults on the mortgage, the lender initiates the foreclosure process. Although procedures vary among states, the end result is generally a foreclosure auction. Foreclosure auctions can be held at the courthouse in the county where the home is located, at the local sheriff's office or at the property itself. The sale is usually published in the newspaper for several weeks prior to the auction. Depending on the lender, you may be able to view the property before bidding. In most cases, the starting bid is equal to the balance remaining on the loan along with interest and attorney fees. You cannot bid less than the minimum bid at a foreclosure auction. The home must be paid in cash or with a cashier's check, depending on the county's auction guidelines.
  
  

REO Properties

• A real estate owned property is referred to as an REO property. Although the name may be misleading, these homes are owned by the bank. If the minimum bid is not met at the auction, the bank attempts to sell the home to recoup its loss. Depending on the bank, the home may be cleaned up before being placed on the market. In some cases, the homes are damaged and sold as-is, with major repairs needed. Prices are set to reflect the condition of the home and current market value. Homes may be priced significantly below market value, while others may be at market value. If the market is competitive and the home is a bargain, some people may offer the full asking price or even higher. With an REO property, you are free to submit any reasonable offer. Cash offers can be more enticing to banks since they are able to avoid dealing with a mortgage company and loan requirements.
  
  

Short Sales

• A short sale is a possibility for homeowners who are behind on mortgage payments. The foreclosure process has likely already begun when a homeowner lists the home. The bank must approve the homeowner's request to sell the home for less than the loan balance. Homeowners work with a real estate agent to facilitate the sale and avoid foreclosure. These homes are deliberately priced below market value to attract buyers. A short sale is designed to close quickly, however, this is not always the case. After submitting an offer to the listing agent, the offer is sent to the bank for review. The bank will decide whether or not to accept the offer. It can take 120 days or longer for the bank to reach their decision, depending on the amount of offers received and how long the home has been on the market. Any reasonable offer will be reviewed.
  
  

Real Estate Agents

• Real estate agents work free for the buyer. If you would like to view foreclosures, you will need to contact a real estate agent to schedule a viewing. Your agent can help you locate REO properties and short sales. Agents can also help you determine a fair offer to place on a home. Buyers cannot submit offers themselves. The agent will draw up a contract and submit your offer to the listing agent. An earnest deposit may be required with your offer.