Mortgage Default Information

Bargains Or Money Pits?

Investopedia |

In Brief...

Buying a foreclosure (FCL), or a property that the bank has taken away from the owner because he or she stopped paying the mortgage, is often touted as a way for both owner-occupants and investors to get a great deal on a property. With no one around to take care of small problems as they occur, small problems can turn into big ones, and big problems can turn into disasters. Windows may also get broken for a normal reason, like an errant baseball, but with no one living in or actively monitoring the property, the window is unlikely to get fixed. To get revenge against the bank and to make an extra buck, the previous homeowners might have removed items that had value, including appliances, fixtures, the kitchen sink, bedroom doors, closet doors, copper pipes and more. Either way, many REOs are missing things that generally come with seller-owned properties. However, as a result of the subprime mortgage meltdown, sometimes even nicer neighborhoods have a high number of foreclosures. You have to look at the usual indicators of value to determine if the high number of current foreclosures might be indicative of a longer-term problem or if it is only a temporary issue because of the current economic climate. Common sense says that banks should want to unload REOs as quickly as possible, but in reality banks sometimes drag their heels in considering offers and throughout the escrow process.

Read the entire article at Investopedia...

Related Topics