Foreclosure lists can be a goldmine to foreclosure investors if they’re accurate and fresh, but is there only one type of foreclosure listing or are there multiple types? If you get one list, will it include all of the types?
There are multiple types of foreclosure lists, and just because you buy an “all inclusive” list, it doesn’t necessarily mean you’ll get foreclosures from all of the different types of lists that are available.
There are four stages of foreclosure and different lists are often available for each type. The four stages of foreclosure are pre-foreclosure, auction, REO, and government repossession. Not all properties will enter all of these stages.
The first step is pre-foreclosure. During this phrase, the lender begins the foreclosure process because of overdue payments. This is typically done when the lender files a Notice of Default, which gives the borrower 90 days to bring their mortgage current.
The borrower is required to come current on any arrears or sell the property to pay the loan during this 90-day period. If this isn’t done in time, the property will enter the next stage.
The second state is auction. In this phase, properties are posted for public sale. These properties can be purchased at the foreclosure auction by paying the past due amount plus any other costs. Sometimes properties don’t sell at auction and they enter the next stage. Most foreclosed properties that reach this stage never receive bids. This puts them into the next stage.
The third stage is known as REO, or real estate owned. This is when the lender comes into ownership of the property. When the property doesn’t sell at auction, the lender gains full control of it.
When this happens, the mortgage has ceased to exist, and the bank now owns the property in full. The bank must then evict the homeowner from the property, work to get any tax liens removed, pay off past-due homeowner’s association dues, and make any necessary repairs.
The fourth and final stage is the property’s ownership reverting to the government. This happens sometimes when loans are insured by a federal agency. These agencies might include HUD, the VA (Department of Veterans Affairs), Fannie Mae, or Freddie Mac.
During this phase, the government reimburses the lender for the amount due on the mortgage and any costs that were associated with the process of foreclosure. At this point, the government becomes the full owner of the property and it’s usually then sold to the public via a contractor or Realtor.
It’s important not to think of one type of property as better than another. Each type of property has a nearly equal chance of being a great deal or being ridiculously overpriced. You should look at each individual property on a foreclosure list and try to find the deals that have the most profit potential.
Those deals could end up hidden in any of the four stages, so you should keep your eyes peeled constantly for the very best deals and snatch them up before someone else beats you to them!
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