Foreclosed homes can be cost-effective ways to buy a house in Northern Virginia because foreclosed homes are likely to sell for less than other homes on the market. But while the process for buying a foreclosed home is similar to purchasing other home properties, the foreclosure home-buying process can sometimes be lengthier both in the buying and closing phases as they can come with institutional red tape. Still, if you have the patience and desire, there can be great bargains out there.
What is a Foreclosure?
A foreclosure happens when a homeowner fails to make mortgage payments, giving lenders the option to seize a home. Foreclosed homes aren’t always first offered as foreclosures; they may have started out as short-sales or pre-foreclosures, and this is important because their early status may affect the final sale.
In some states, foreclosure is a lengthy legal process that can take years. In others, it can take less than a few months and bypass the court system completely. In Virginia, particularly, residential foreclosures are nonjudicial. This means that the lender doesn’t have to go through state courts to foreclose. However, there are also some cases of judicial foreclosures. Most of the time, after foreclosure, there will be an auction and the property will be sold. Post-foreclosure redemption periods are rare, but they are possible, and deficiency judgments are permitted. The whole foreclosure process in Virginia usually takes about 2-3 months.
The Steps in the Foreclosure Home-Buying Process
During the process of buying a foreclosed home, it is important that you work with an experienced and knowledgeable broker and their network of specialized industry professionals. Any of our List With Elizabeth team are qualified and would love to help you find a Northern Virginia home that fits your specific needs.
Just as in the usual home-buying process, it’s important to first get pre-approved for a mortgage. Before you start looking to buy a foreclosure at foreclosure auctions or REO (real estate owned) listings, make sure you can get a mortgage, unless you are planning to pay with cash.
Auctions are typically the first stop for Northern Virginia foreclosure sales, but you can search for foreclosed homes at real estate auction listings online, through real estate agents, in local newspapers, or at your local city hall or court. You can find REO listings directly through banks and through larger real estate websites.
Whether you decide to bid at an auction or negotiate for an REO through your agent, the next step in the process is executing the offer. This is when you put an offer on a home that fits your budget. You should work with your real estate agent to prepare a purchase contract and complete all documentation moving forward.
Once you put an offer on the home, you’ll definitely want to arrange for inspections. If it’s allowed, you may even find it wise to inspect the property prior to putting an offer down to buy a foreclosure. It isn’t always the case, but foreclosed properties often have damage and disrepair from lack of upkeep. The fixes are yours to pay for, so you may want to know what you’re getting into. For a foreclosed home, you’ll want a thorough home inspection, including add-ons such as a termite and radon check, along with a sewer and water quality assessment. The more you know up-front about the state of a foreclosed home, the better.
Once you finalize the logistics to buy a foreclosure, then the work really begins! Remember those inspections? Many foreclosed properties require extensive repairs, from electrical upgrades and plumbing repairs to roof replacements and foundation work to get up to code. But once you’re finished with fixing up your foreclosed home, move-in will be so satisfying.
Other Things to Know
A title search is another absolute must when considering the purchase of a foreclosed home. Title searches unearth many potentially stressful problems. When the bank owns the property, they don’t necessarily have to resolve any issues with liens and back property taxes. The new owner — which could be you — will be the one to pay for these lapses.
It may come to your attention that the home has some liens that need to be resolved, as many foreclosed properties have more than one loan. Check to be sure that the previous owner didn’t have piggyback loans, or loans from multiple lenders.
Research suggests that finding foreclosure deals in the Northern Virginia area is harder than ever. There just aren’t as many on the market as there used to be, and there are a lot of home hunters looking to flip bargain houses for profit. So a foreclosed home purchase is not for everyone, but List With Elizabeth would love to help to see if it can be for you.