Everybody watches late night TV and sees the infomercials on how people made millions buying bank foreclosures. Can you do it? It is possible but banks have closed many of the loopholes in the lending process.
Let me explain what happens in the foreclosure process in Michigan. A homeowner falls 3 or more payments behind on the mortgage. The bank then sends them a letter that they are going to start foreclosure proceedings against the homeowner. Sometimes the banks are very quick to get a letter out and start the foreclosure proceedings. Other times some banks take months to get the foreclosure process started.
If the home owners make no attempt to correct the situation and pay up, then it is usually turned over to a foreclosure attorney to handle. During this time the bank usually requires the full amount of arreage to be paid. They won't accept just one payment. They want the full amount. If they owners don't pay the full amount or reach an agreement with the bank. (Remember the bank does not have to agree to take partial payment) The house is then scheduled to be sold at * sheriff sale*. The home is auctioned off. Unfortunately many people think you can steal the homes at the sale. There are deals there at the sale but you have to do the research on the homes and their value. But what usually happens is the bank will buy the home back. The reason they do this is because they have a mortgage on it. Let's say the house is worth $120,000 and the homeowners owe $100,000 on a mortgage. The bank will buy it back up to the $100,000 to recover their costs and to get the other possible liens off the home. You could buy it for $101,000 or more and the bank would probably let you buy it.
If the mortgage was $90,000 then the bank would bid up to $90,000 to keep their interest in the property. So up to this point the only way you can get a deal on the property is to out bid other buyers on a home. (and the mortgage on the property was not close to the value of the home.)
Now the bank owns the home. The original owners may still be living in the home. They have up to 6 months to pay the bank the full amount to keep the home. This seldom happens. The poeple can actually still live in the house and not pay anything and the bank can't kick them out until the six months is up. So sometimes these people live in the house for up to a year or year and a half and not pay a dime!
The bank usually waits for the six month redemption period to lapse. They then contact 3 different real estate agents. The bank will ask the three realtors to give them a price that the house should sell for. The bank is asking the realtor for a price, that price usually is fair market value in the eyes of the realtor. So that foreclosed home is no deal. It is around fair market value. The bank then hires a realtor to change locks, winterize the home, clean carpets, and if necessary get the home in saleable condition.
So the bottom line is that the bank is trying to recover what they are owed on the house or get fair market value. So most homes that are foreclosed are not great deals. Though there are some fixer uppers that may be deals. Ask your real estate agents to look for them. There also are HUD foreclosures that go through a little different process. There may be deals in them. I will be talking about them in another section.
The key to buying homes cheaply is to know values of the neighborhood and city and look for fixer uppers or homes below market value. Or buy Michigan homes that the people have relocated and have to sell. Or a divorce situation where they want to dump the home.
To get more buyers tips and sellers tips go to my website www.russravary.com or search Michigan homes for sale
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