Whenever the mortgage brokers fail to pay the monthly payments as agreed then the lender is having the right to seize the property and sell it to the new buyer and recover the balance. This whole procedure is known as foreclosure.
Image courtesy: https://www.forbes.com/sites/taramastroeni/2019/07/10/heres-what-you-need-to-know-before-buying-a-foreclosure/#7e4e8d567784
Actually, in this process, the borrower of the mortgaged property loses his or her home as well. Once the lender gets the overall control over the property that it is his decision that you want to sell it for making up the financial loss or what he wants to do with it. Apart from this, the investors and consumers can also purchase the properties of one through the auctions or from the bank or government agencies as well. It actually depends on that who owns the property.
Should anyone purchase the foreclosed property?
Well, the answer to this question is actually e depends upon the advantages and disadvantages. Considering the same, here we have given the pros and cons of this decision. Let’s take a look.
What are the advantages?
Sometimes it happens that people get the property at low prices as compared to the market prices. Whenever the lenders want to recover the money from the property vary then sometimes they sell it even at the low prices as well. At that time, their whole motive is to get their money recovered. It is actually an advantage for others who purchase the foreclosed property.
What are the disadvantages?
Along with the advantages, there are some disadvantages also that are associated with this foreclosure situation.
- Usually, it happens that the foreclosed properties are quite poorly maintained or in disrepair. If the person goes for the foreclosed property that is only maintained that it may lead to a huge loss.
- Most of the time, it happens that the sellers do not want to make any repair. Even after purchasing the property, the purchaser needs to invest in it.
- It may also happen that the previous homeowner takes the home back.
- In order to purchase the foreclosed property at auction is necessary for you to have a sufficient amount of cash in hand. You cannot purchase it with the help of any credit basis.
- You will not get any records of property repair and maintenance.
What are the stages of foreclosure?
Actually, in the foreclosure process, the lender goes through to seize the property according to the state. In some places is it happens that it includes the judicial proceedings before seizing the house. Apart from this, there are some non-judicial options also available. Legally, the foreclosure cannot get initiated and the borrower completes the 120 day payment time period. In simple words, the borrower gets 3 months to pay the amount and after that, the lender gets the authority to seize the property sell it.
Hence, these are all the essential details about foreclosure. Simply, it can be stated that it occurs when a homeowner stops paying the mortgage.