As home prices soar and available inventory decreases across the United States, prospective buyers are now considering the foreclosure market to find a property within their price range. When borrowers fail to pay lenders according to the terms of their mortgage notes, the banks and finance companies initiate legal proceedings to take possession of the houses that serve as collateral.
In an effort to recoup funds lost on the bad loans, they then sell the subject properties at something often less than market prices. Interested home seekers should know a few key things before buying foreclosures in Texas.
Read More: What Happens After a Bank Buys a Foreclosure?
Where to Find a Foreclosed House
In Texas, a real estate agent is a required party to a foreclosure transaction. Utilizing a real estate agent is also a wise decision. There are pitfalls in buying a home that has been reclaimed by a bank; the agent can help the client navigate around those dangers.
One caveat to this advice is to make sure the agent you select is not representing the bank, that is, the seller, at the same time. An agent should look after the buyer's interests exclusively. The Texas Realtors association is a resource with which to begin a search for the right professional.
With access to local multiple listing services (MLS), the real estate agent can scan the foreclosed homes for sale. Yet legal status should not be the only filter the agent applies. Potential buyers should make their desires known in terms of what criteria the house should meet.
One thing to bear in mind regarding this sort of shopping: the pickings may be slim in prosperous areas while the economy enjoys flush times. It goes without saying that economic recessions and the consequential loss of jobs give purchasers a larger pool of foreclosed properties from which to pick.
Read More: Buying a Home in Foreclosure
Financial Considerations When Buying a Foreclosed Home in Texas
Some foreclosed properties allow for certain financing regimes while forbidding others. For example, there are foreclosures that mandate cash-only purchases. Other lender-owners will allow the buyer to secure a mortgage loan but require prequalification of the buyer under their own underwriting guidelines, even if the loan is taken out with another institution.
So, shoppers must confirm what arrangements will be allowed before bidding on a bank-owned foreclosure. Because the property is a liability for the financial institution, it will, as the seller, want the quickest and cleanest conveyance possible.
Condition of a Foreclosed Property
Negotiating a price and executing a contract with the bank will, in large part, hinge on the state of the house in question. Many bitter prior owners will do damage to a house on the way out the door. Others neglect needed repairs of abandoned homes for sale in Texas for lack of funds.
In Texas, buyers of foreclosed homes may inspect the premises but are often told by the lender-owner that the sale must take place "as is." If this is the case, the buyer offer should take repairs and renovations into account.
Getting the House Ahead of Foreclosure
Some of the best purchase opportunities are with houses in preforeclosure. The owners are eager to avoid the damage a repossession will do to their credit and are thus willing to be very flexible with pricing and payment arrangements. Texas homeowners receive a court-issued "Lis Pendens," or Notice of Default, which is recorded in county records.
The real estate agent can find a preforeclosure list Texas compiles. This manner of property offers sellers that are highly motivated.
- Bid quickly on foreclosures, they don't tend to last long on the market.
Adam Luehrs is a writer during the day and a voracious reader at night. He focuses mostly on finance writing and has a passion for real estate, credit card deals, and investing.