Regardless of income level or neighborhood in the Nashville area, foreclosures can happen anywhere and affect anyone. And there are a variety of reasons why people fall behind on their mortgage payments such as: job loss, credit card debt, interest rate adjustment, medical expenses and illness, divorce, multiple bills, sudden relocation, etc.
The process of foreclosure begins when a homeowner begins missing their mortgage or loan payments and their lenders make legal moves to repossess the property to recoup lost funds. Many buyers associate buying a Nashville area foreclosure with getting a "steal of a deal." This can be true, but there are also potential pitfalls to look out for.
The Different Stages of Foreclosure & the Pros & Cons
The pros and cons of buying a home in foreclosure vary depending on what stage of foreclosure the property is in when purchased. These stages include: Pre-foreclosure, Aution, and REO (bank owned or real estate owned).
Pre-foreclosure - when you buy the home directly from the homeowner, before the bank officially forecloses. With this type, the seller will be motivated for fast sale, increasing buyer’s bargaining power. You will also be able to gather all of the necessary information, such as inspection reports, research title during due diligence/contingency period, etc., that may not be available with other foreclosure properties.
Auction - Real estate auctions offer the best chance for a great deal but also hold the greatest risk as these properties are sold as-is. Property will be sold for outstanding mortgage balance owed to foreclosing mortgage holder - this can be a low price for the property. Cash payment requirements reduce competition. No inspections allowed - as-is sale. Buyer may take property and owe other liens, back taxes and mortgages. Buyer must research state of title prior to auction. Bank cannot provide disclosures as to property history/condition issues.
REO (Real Estate Owned) - When a foreclosure goes to auction and doesn't sell, it becomes a REO or bank owned property. With a REO, the bank is motivated to get property sold and will negotiate price, down payment, closing costs, escrow length, etc.; title will be clear; buyer will not take on any liens, mortgage or back taxes of prior owners; inspections and mortgage financing are allowed within normal due diligence/contingency period, property will be vacant and will usually be listed on MLS; bank will pay real estate agent's commission; and REO sales close within a normal escrow period of time. The bank cannot provide disclosures as to property history/condition issues and will not agree to do any repairs - as-is sale.
Although Nashville area foreclosure properties can be priced at a significant discount, they can also be a riskier investment. That is why you need a Greater Nashville real estate agent well versed in the complexities of the foreclosure market.
Whether you're looking at pre-foreclosure properties, auction propertes or bank-owned properties (REOs), you are going to need the guidance of an experienced professional who has a background in buying and selling these types of properties.
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- Importance of Inspection
- Your Credit Score Matters
- Is Buying a Home Still a Smart Plan?
- Why Hire a Buyer's Agent?
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Whether you are ready to buy a home in the Nashville area, sell your existing home, or invest, our team of experienced real estate professionals will work relentlessly to make sure your experience is a positive and rewarding one!
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RE/MAX Fine Homes
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