Overview

Foreclosure is a process that allows a lender to recover the amount owed on a defaulted loan by selling or taking ownership (repossession) of the property securing the loan. The foreclosure process begins when a borrower/owner defaults on loan payments and the lender files a public default notice. The foreclosure process can end one of four ways:

1. The borrower/owner pays off the default amount to reinstate the loan during a grace period known as pre-foreclosure.
2. The borrower/owner sells the property to a third party during pre-foreclosure, allowing the borrower/owner to pay off the loan and avoid having a foreclosure on his or her credit history.
3. A third party buys the property at a public auction at the end of the pre-foreclosure period.
4. The lender takes ownership of the property, usually with the intent to re-sell. The lender can take ownership through an agreement with the borrower/owner during pre-foreclosure or by buying back the property at the public auction.

Foreclosure Buying Opportunities

The foreclosure process offers three bargain-buying opportunities, represented by six different property statuses.

1. Buying during pre-foreclosure (NOD, LIS)
2. Buying at public auction (NTS, NFS)
3. Buying bank-owned properties (REO, GOV) 

5 Steps to Buying a Foreclosure  

STEP 1. Find A Property

Buying a home in foreclosure can begin with you contacting Murex Realty & Brokerage and decide where you want to search for property.

1. Select Pre-Foreclosure for Default Notices or Lis Pendens.
2. Select Auction for Trustee Sales or Sheriff's Sales.
3. Select Bank Owned or Government Owned for REOs (repossessions).

See Step 4 in this guide for more about the different property statuses.

 STEP 2. Get Financing

Obtaining financing not only gives you an estimate of what you can afford, it also enables you to move quickly once you locate a property that interests you. When you approach a borrower/owner or a foreclosing lender about a property, secured financing will demonstrate that you are a serious buyer and are ready to buy quickly.

You can apply for financing with one of Murex’s lending partners. Start with the Calculators tab and it will help you determine just how much home you can afford. Next click on the Mortgage Credit tab to start the process of pulling your credit scores so that you will know just what type of financing that you can secure and if there are any blemishes on your credit profile that need to be addressed.

 STEP 3. Contact Murex Realty & Brokerage

If you're a first-time homebuyer and you've never purchased a home, let alone a foreclosure property, it is beneficial to contact one of our knowledgeable agents who can guide you through the process of buying a foreclosure. If you choose to work with another agent, make sure they know your priorities. Ask any potential agents if they have experience with foreclosures. Especially for first-time buyers, a good agent can be a comforting and helpful resource.

 STEP 4. Contact Owner

Depending on the property status, the seller will be the owner in default, the trustee or the foreclosing lender.

Buying a property in pre-foreclosure involves approaching the borrower/owner and offering to buy the property. The borrower/owner can walk away with something to show for any equity in the property and avoid a bad mark on his or her credit history. The buyer has time to research the title and condition of the property and can realize discounts of 20 percent to 40 percent below market value.

If the loan is not reinstated by the end of the pre-foreclosure period, potential buyers can bid on the property at a public auction. Buyers often are required to pay in cash at the auction and may not have much time to research the title and condition of the property beforehand; however, a public auction offers some of the best bargains and avoids the unpredictability of dealing directly with the borrower/owner.

If the lender or government agency takes ownership of the property, either through an agreement with the owner during pre-foreclosure or at the public auction, the lender usually sells the property to recover the unpaid loan amount. The lender typically clears the title for any buyer, but the potential bargain is often less than a pre-foreclosure or auction property. 

If you have never purchased a foreclosure property before, we recommend that you have a real estate agent help you prepare and make an offer.

To get an estimate of the potential bargain for any property, you need to find out the estimated market value of the property, how much is owed on the property and if the owner has any other loans or liens encumbering the property. This is where we at Murex Realty & Brokerage play an integral role in assisting you with your offer. Our Agents will provide you with a Market Analysis of the subject property to determine the appropriate offer for the property.

If the property is selling at auction, you will need to make your offer, or bid, at the auction. In many states, bidders are required to pay in cash in the form of a cashier’s check at the auction. You probably won’t be able to conduct a full inspection and title search when you buy at an auction, so it’s important to do careful research before attending an auction.