Getting a foreclosed home

[Alex Guerrero]

Im moving to Austin and housing is so expensive I figured this would also cause some homes to foreclose as well, but i see things like pre-foreclosure, shefif, foreclosed. What do these terms mean and what should i look for as well as where do i begin?

[Nathan Gesner]

Preforeclosure is just an early step in the process. The Lender notifies the Owner they are delinquent and facing foreclosure. As a buyer, you can keep an eye on these homes to see if the Buyer gets back on track.

Once the property is foreclosed, then the Sheriff will do a foreclosure sale. Anyone interested in buying (or just watching) shows up and makes bids. You do not get to look at the property first and they won't tell you if there are any problems, if it's still occupied, if it has liens against it, etc. If you have the winning bid, you are required to pay the full amount, usually within a couple hours.

Even after you win, the Owner has a certain amount of time to redeem the foreclosure and take the property back. I think it's usually 90 days. If they are able to buy it back, they have to pay you the purchase price plus a pretty high interest rate. In my state, it's around 18% interest. If they don't redeem it within 90 days, then you get a Sheriff's Deed and the property is yours. Then you may be stuck dealing with occupants that refuse to leave, stolen appliances/fixtures/cabinets, a place that's been trashed, outstanding liens that you weren't aware of, etc.

I heard of a young lady that got excited about foreclosures about four years ago. She bought one in Florida for around $100,000 and then discovered it had a $150,000 lien on it. She coudn't afford to pay the lien and had to foreclose on the property, losing $100,000 in the process.

I've seen people get some really good deals, but you have to learn how to investigate the property and you need money on hand.