Buying a foreclosed property is different than the average home resale purchase.  If you are considering buying a foreclosed property make sure that the agent you are working with has experience in this field.  It is not the same as a traditional resale. Get your patience out and be prepared for twists and turns you never anticipated.

Things to watch out for with a Foreclosed Property:

• Inspections.  The seller/lender will often know nothing about the property.  A good inspection is crucial.
• Tax Liens.  Don't assume all tax liens have been cleared on the property.
• Time Lines.  Banks don't always honor your loan time framework.  Have a backup plan.
• Price.  The price is not automatically a bargain - check your comps.
• Double Check Everything - Banks frequently issue contradictory paperwork and make mistakes
• Be prequalified with several major REO banks in your area. Most are now requiring it. It will save time.

Usually once a bank had foreclosed on the property and it is listed for sale they are ready willing and able to sell it in a fairly timely manner. Just don't count on any timelines.  You must remember that there is no emotion, no pressure on the bank to sell the house by a certain date.  The house is just a file on their desk.  There is no emotional attachment to the property.  Banks will negotiate the price and counter offer if you offer too low. As of this writing in late 2009 the banks are putting their properties on the market at 15-25% under market and they typically are getting multiple offers.  Offering below asking in this market is not a solid negotiating strategy when dealing with a bank owned property.  Lastly, remember you cannot count on response times so you must take that into consideration when obtaining your loan to purchase the property.

There are many variations on the terms used to define the phases of foreclosure. Please click Understanding foreclosure terminology to read my blog post explaining this.

    If you own a home and can no longer make your payments in a timely manner you must know what your options are. Ignoring your lenders calls or letters could cost you your home.  It is hard and certainly a little scary but the faster you take steps to learn about your options the more likely you are to save your home and your credit. Click list of lender help lines for a list of lender phone numbers that have been established to help existing customers.

     If you need to sell your home, but you cannot sell it for enough money to pay all the costs and the loan, there is an option called Short Sale.  This is not a foreclosure and it can help you protect your credit to an extent.  Please see the page on this site called Do you need to think about a Short Sale?

  Michaels' TIP:

Loan modification - debt consolidation/reduction serivces can be pretty tempting when times are tough.  DO not fall for a con artist and make your bad situation even worse.  In California it is illegal for an individual who is not a liscensed attorney to take an up front fee for these services.  Stay on guard and don't think it is as easy as paying someone else to do it for you.  If you have legitamite hardships the lenders will work with you directly and you can reduce your paymemts yourself.

HUD RELEASES TIPS FOR AVOIDING FORECLOSURE
Information aimed at helping more homeowners stay in their home

WASHINGTON - Today, the U.S. Department of Housing and Urban Development (HUD) released its top 10 tips for homeowners who are facing foreclosure.

"These guidelines will assist homeowners who are struggling to pay their mortgage and could be threatened with foreclosure," said HUD Secretary Alphonso Jackson. "We want to encourage homeowners to take action and use every resource available so that they can get control of their finances and stay in their home." You can also call the HOPE line, a free 24 hour hotline provided by a nonprofit organization, at 1-800-995-HOPE.

If you are unable to make your mortgage payment:

1. Don't ignore the problem.

The further behind you become, the harder it will be to reinstate your loan and the more likely that you will lose your house.

2. Contact your lender as soon as you realize that you have a problem.

Lenders do not want your house. They have options to help borrowers through difficult financial times.

3. Open and respond to all mail from your lender.

The first notices you receive will offer good information about foreclosure prevention options that can help you weather financial problems. Later mail may include important notice of pending legal action. Your failure to open the mail will not be an excuse in foreclosure court.

4. Know your mortgage rights.

Find your loan documents and read them so you know what your lender may do if you can't make your payments. Learn about the foreclosure laws and timeframes in your state (as every state is different) by contacting the State Government Housing Office.

5. Understand foreclosure prevention options.

Valuable information about foreclosure prevention (also called loss mitigation) options can be found on the internet at www.fha.gov.

6. Contact a non-profit housing counselor.

The U.S. Department of Housing and Urban Development funds free or very low cost housing counseling nationwide. Housing counselors can help you understand the law and your options, organize your finances and represent you in negotiations with your lender if you need this assistance.

7. Prioritize your spending.

After healthcare, keeping your house should be your first priority. Review your finances and see where you can cut spending in order to make your mortgage payment. Look for optional expenses-cable TV, memberships, entertainment-that you can eliminate. Delay payments on credit cards and other "unsecured" debt until you have paid your mortgage.

8. Use your assets.

Do you have assets-a second car, jewelry, a whole life insurance policy-that you can sell for cash to help reinstate your loan? Can anyone in your household get an extra job to bring in additional income? Even if these efforts don't significantly increase your available cash or your income, they demonstrate to your lender that you are willing to make sacrifices to keep your home.

9. Avoid foreclosure prevention companies.

Many for-profit companies will contact you promising to negotiate a loan work out with your lender. While these may be legitimate businesses, they will charge you a hefty fee (often two or three month's mortgage payment) for information and services your lender or a HUD approved housing counselor will provide for free if you contact them. You don't need to pay fees for foreclosure prevention help-use that money to pay the mortgage instead.

10. Don't lose your house to foreclosure recovery scams!

If any firm claims they can stop your foreclosure immediately if you sign a document appointing them to act on your behalf, you may well be signing over the title to your property and becoming a renter in your own home! Never sign a legal document without reading and understanding all the terms and getting professional advice from an attorney, a HUD approved housing counselor or trusted real estate professional.

To find out more about HUD-approved housing counseling agencies and their services, please visit www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm or call toll free (800) 569-4287 on weekdays between 9:00 a.m. and 5:00 p.m. Eastern Standard Time (6:00 a.m. to 2:00 p.m. Pacific Time). The same number can give you an automated referral to the three housing counseling agencies located closest to you.