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Types of Home and Land Foreclosure Sales

One segment of real estate investors specializes in buying at home and land foreclosure sales. These are the sales and auctions of houses, business property and land that have been seized by lenders for loan defaults. Some investors seek only a single property – a home to live in or rent out, a business property for use as a home base for their own business, or land that can be developed.

Unlike the more usual type of property sale, the home and land foreclosure sales deal with properties that are or have been involved in legal wrangling and, although they often result in good prices for buyers, they can also serve up pitfalls for the uninitiated. There are three types of home and land foreclosure sales. They are divided by the point in the foreclosure process at which they are offered for sale.

The Types of Sales

The three types of home and land foreclosure sales are the pre-foreclosure sale, the foreclosure auctions and the lender-owned sales. In the pre-foreclosure sales, the foreclosure process has begun, but the property is still owned by the borrower. Because the owner is faced by impending seizure of his property and loss of his credit rating, good deals can usually be made. Professional real estate investors look to acquire property at pre-foreclosure sales for about 70% of its appraised value.

A benefit of this type of home and land foreclosure sale is that the property may be inspected before the sale. Experts advise having financing in place before shopping. Because of the time pressures, the owner will want to sell for assured money. With the financing ready to go, a buyer can often acquire property for the amount that is left on the mortgage.

Foreclosure sales and auctions require the most education. Often, the most experienced real estate investors are the ones who come out ahead at this kind of home and land foreclosure sale. The properties have been seized by lenders but often have residents still living in them. Most often, the properties can’t be inspected beforehand; payment is expected in a short time and usually must be paid by check or certified check.

As many as half of the listed properties will be withdrawn before the auction as owners make last-minute deals with lenders. Often, lenders will take part in the auctions to ensure that prices are high enough to cover the amount in default. When investors do not bid high enough to cover the debt, the property may be purchased back by the lender. Even after a successful bid, the new owner has to face evicting the old owner and risk damage to the property by a disgruntled former owner.

The final type of home and land foreclosure sale is the lender-owned sale. These properties are sold by the lender who has taken possession. This resembles a more conventional sale and often means the least value and least risk. Always remember to do your homework before buying property at every kind of home and land foreclosure sale.