A foreclosure happens to be a home that belongs to the bank and once was the property of the homeowner. The home was either abandoned or either handed over voluntarily to the bank. It is a series of actions in which the lender (usually a bank) tries to retrieve the balance of a loan that had been issued previously to the homeowner who is no more able to pay the principal and interest payments on their mortgage.
Though one may hear about the bank taking the property back but that is not the case because the bank never really owned the property. That is why the bank cannot take back something it did not even own in the first place. There is a difference if the bank foreclosed on the mortgage or trust deed and seized the home. The lender has numerous options which it can opt for that includes the revision of payment schedule as well in order to make the loan more affordable for the homeowner or even putting the house up for auction.
Benefits of Foreclosures:
Listed below are the benefits of foreclosures:
- Discounted Price:
There are a large number of foreclosed homes in various neighborhoods of United States and these properties happen to have the potential of being marked down substantially from the other properties in the same area. Foreclosures create the opportunity for someone to purchase a property at considerably discounted price which allows them to buy that property.
- Fresh Start:
In the early 21st century, when the housing market began to decline numerous owners realized that their homes were no longer worth the amount they owned on the mortgage. For these owners, foreclosures happen to be the best option to unload a burden they cannot carry anymore. Owners consider the amount of equity they have in the house (equity+ value of home – mortgage debt) and if tends to be less than 25%, they rather choose to walk away.
- Bargaining Power:
A prospective buyer could use the bank’s possession of a foreclosed home completely to their advantage if the proper negotiating tactics are followed with the right timing. This is because banks are more apt at issuing loans to the homebuyers rather than directly selling homes.
Financial institutions proceed with the aim of getting rid of the foreclosed properties for a reasonable price as soon as possible. Their goal is secure as much amount of the original loan as possible. So the longer a property is held by the bank, the odds are in favor of it considering low offers.
If the savings happen to be on the acquisition side, the low foreclosed prices encourages the probability of the buyer getting a gain on their investment in future. If the foreclosed home is sold for lesser amount compared to the similar properties on the same street or division, the prospect buyer’s percentage increase could be more if there is a general rise in the value of all neighborhood homes.