Whether you are an investor, house flipper, a regular home buyer, or an HOA board member trying to improve your community, buying a foreclosed home offers an excellent opportunity to acquire a piece of real estate for less than market value.
However, you need to know what you are doing to make the venture profitable. Buying an assessment lien foreclosure can be risky and complicated, so you must consider several crucial points.
What is a Foreclosure?
Foreclosure can occur when a property owner fails to pay a mortgage to a bank or a financial institution that has issued a loan. Texas has three main foreclosure categories: pre-foreclosure, auction, and real estate-owned (REO) foreclosure. A homeowners’ association can bring an assessment lien foreclosure when the homeowner doesn’t pay HOA fees after a specified amount of time.
What is Pre-Foreclosure?
Pre-foreclosure occurs when the lender issues notice to a property owner that they must repay their debt, or their house will be foreclosed.
What is the Action Category of Foreclosure?
An auction occurs when the property has been officially foreclosed, and the lender tries to sell the property at auction to recoup some of the debt.
What is REO Foreclosure?
REO foreclosures happen when a property does not sell at auction, and the lender attempts to sell it on their own. They can also occur when a property owner misses a specific number of payments and the lender officially takes control of the home.
Why are Foreclosed Homes Attractive?
Foreclosures often result in below-market prices, so they can be worthwhile if you are patient enough for the right property to come along. However, you should note that foreclosed properties, especially older ones, may not be in good condition and will need extensive renovations that sometimes negate the bargain price.
In other cases, you may end up paying above market price for a desirable property, depending on what stage of foreclosure the home is in.
Where Can I Find Foreclosed Homes?
Interested buyers can find foreclosed homes on general real estate sites like RealtyTrac and Zillow by using pre-foreclosure or foreclosure filters.
You can also find them on Foreclosure.com as well as on the monthly foreclosure listings found on our website.
Texas law also requires foreclosure auctions to be advertised for a minimum of three weeks in a local newspaper.
The Process of Buying a Foreclosure Home
Buying a foreclosure home is similar to purchasing a conventional home. You find the property, make a written offer, negotiate, and then close. If it is a pre-foreclosure or an REO, the process takes about 45 days. Sometimes an REO can take longer if the lender cannot find a convenient time to close the deal.
Auctions are slightly different. You must register on the county sheriff’s website where the property is located, attend the auction, bid on the property, and then pay cash for it. Thus, if you need to finance the purchase, you won’t be able to buy a foreclosed property at auction.
Buying a Foreclosure Can Be Complicated
Although some foreclosure purchases are easy, others can become fraught with problems, depending on which stage of the foreclosure process. Factors that delay the purchase include legal issues requiring resolution and compliance with Texas foreclosure laws.
The latter can be challenging to understand, so it makes sense to retain the services of an HOA attorney to interpret those laws and provide advice and assistance on the purchase process. Attorneys familiar with the foreclosure process can help make sense of the confusion while also informing you of the potential consequences of buying a foreclosure home.
Work with Manning & Meyers on Your Next Home Foreclosure Purchase
The experienced lawyers at Manning & Meyers can help you with foreclosure purchases and many other real estate issues, including HOA law in Dallas. We specialize in foreclosure sales, HOA law, eviction law, and more. Contact our office to set an appointment for your free consultation.