Purchasing a foreclosed property can be a relatively inexpensive way to enter the world of home ownership for the first time or buy into a neighborhood you wouldn’t otherwise be able to afford. While it’s true that you could save up to 30 percent by purchasing a foreclosed property, there are risks involved, and a wise buyer is always an educated one.
Be aware, first and foremost, that foreclosure laws vary from state to state. There is no one-size-fits-all national set of rules. One of the major ways you can distinguish one state’s laws from another is to know whether yours is a mortgage state or a deed of trust state.
What is a mortgage state?
A mortgage state is one that uses mortgages to secure a loan. In many cases, mortgage states require the judicial foreclosure, or foreclosure by judicial sale, process to foreclose loans.
What is a deed of trust state?
A deed of trust state is one that uses deeds of trust to secure a loan. While the judicial foreclosure process is available in deed of trust states, in many cases lenders use the non-judicial foreclosure process, which is much quicker.
Do your homework
There are certain red flags to watch out for when purchasing a foreclosed property regardless of whether it is located in a mortgage state or a deed of trust state. These red flags include:
- Federal (IRS) tax liens
- State tax liens
- Unpaid real property tax liens
- Judgments against the owner
Contact the city or town where the property is located
You would be smart to check with the city or town for unpaid property taxes that have not been filed with the county recorder’s office and also for the property’s assessed value. If the property assessment is considerably lower than others in the neighborhood, that could be a sign of some hidden property issues.
Get a title search
You can find out whether the foreclosed property you are interested in has any red flags attached by requesting a title search of the property records. Get a title search You can find out whether the foreclosed property you are interested in has any red flags attached by requesting a title search of the property records.
Foreclosure does not automatically remove all potential title issues or risks to the new property owner. Utility companies may hold easements (rights to use the property) for access to utility lines or the property may be affected by an access easement (rights of others to pass through the property). Some localities impose restrictions, such as fence height. A foreclosure specialist can help you uncover these issues so you know exactly what you’re getting into before you buy.
What should you do if there are any red flags and you still want the property?
If any red flags do exist, then it’s time to get in touch with legal counsel for advice on how to proceed. Issues that seem insurmountable at first may be disposed of through the foreclosure process, but you won’t know that until you consult an attorney who specializes in foreclosure cases.
Roman Lopez is the owner of The Roman Lopez Real Estate Team, a full service real estate company specializing in Greater Austin home sales, purchases, and investments properties.
Roman has worked and excelled in the real estate business in Austin, TX for the last 7 years. Roman's real estate career started in 2008 where he was named Rookie of the Year for the KB Home Central Texas Division.
After a successful career with KB Home, Roman obtained his real estate licence and joined Keller Williams Realty where he again rose to the top and won Rookie of the Year for Keller Williams Austin.
After a year as a solo agent he built a team of top producing agent, The Roman Lopez Real Estate Team. His team now ranks as one of Keller Williams top teams closing over 200+ residential sales transactions per year.
Roman's designations include: Certified Negotiation Expert, Certified Distressed Property Expert, Certified International Property Expert, Certified International Property Expert, and Global Property Specialist.
Roman's Awards: Keller Williams Austin Rookie of the Year 2011, 2008 KB Home Rookie of the Year Central Texas Division, 2015 Platinum Top 50 Winner, Platinum Top 50 Finalist, 2014 NAHREP Top 250 Latino Agent in the US, 2014 NAHREP Top 20 Latino Agent in Austin, 32015 NAHREP Top 250 Latino Agent in the US, 2015 NAHREP Top 20 Latino Agent in Austin, 2015 Best of Angie's List, 2015 Real Trends Best Real Estate Agents, 2014 Best of Trulia Best Real Estate Agents
If it's your first time buying or selling real estate, you don't know
"I could not be more happy with Roman Lopez, and here's why. When I first received his help, It was Just Roman Lopez. We were a recent couple with a new baby boy and needed the right home for our family. As most may know, it takes time and patience to find the right house, and Roman provided that time and patience when we asked for it. Finally after Roman and I decided to venture outside of Austin, there was One house that caught our eye. I will never forget when Roman and I drove up to the house in Buda. Instantly after we got out of the car, I told him " This is the one!"..He smiled as he usually does and agreed, as it fit our original description of the house that we wanted and he began describing the rest of the house along with the possibilities of its potential for our family. The house was not in Austin as we had planned, but as Austin grows, so does the traffic. After trading in the traffic of Austin for the piece and quiet that Buda offers, our family could not be more happy with our choice. That's all thanx to Roman Lopez and the excellent service he provided. Since then, I have nothing but praise for his talent and the rest of his team, which I'm proud of. He and his team have excelled and achieved great things since our original purchase. The Roman Lopez Real Estate Team will be our only choice when we decide to purchase our next home. Can't wait until that day comes!!"