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Dealing with Foreclosure Property

Foreclosure is the legal right of a mortgage holder or other third-party lien holder to gain ownership of the property incase their is default in payment by the borrower.

"Foreclosure is the legal right of a mortgage holder or other third-party lien holder to gain ownership of the property incase their is default in payment by the borrower.

If a borrower fails to pay his dues as agreed upon and 6 months has gone by without any payment been made against the property, the financial institution has to right to take the property for open auction against the outstanding dues on the loan.

An officer is assigned through financial institution in such case along with legal person. Accordingly value the property is executed by an authorised valuer. A reserve price is set in consultation with the creditor.

The said property is than offered to through varies methods (namely):

- Obtaining quotations from the persons dealing in secured assets or otherwise interested buyers for such property

- Tenders from Public

- Holding Public auction

- Private treaty (Banks hold the property for them self)

These properties will come in a price less than the actual price of the property (marginally 35-40%). It also depends on whether you are buying the property only as an investment or if you intend to occupy the house. For example you may not want to live in a neighborhood where most of the homes are rentals, but this may not matter if it is an investment. As with any major purchase you need to do your homework because many of the laws that protect you in a conventional real estate transaction may not apply to a foreclosed property. Further many times if the person who owned the home was foreclosed on because of not being able to make their mortgage payments, their may be other debts such as property taxes that will need to be considered.

The borrower in this case is notified by the assigned officer thirty days prior to any of the above mentioned method for auctioning of the property. Accordingly the creditor is bounded to send out a Public notice in 2 leading newspapers with mentioning of the property along with all the details, reserver price, total outstanding debt on the property along with time and venue of the auction of the said property.

A foreclosure property can be spotted in public notice section or in vernacular, although there is few website offering the same services for interested parties to register themselves for such a property.

At first glance, it looks like a tempting deal: you get a perfectly good home for practically half the price for sale, or even less. But this could be a catch, because every city has unscrupulous sellers, buyers, agents and lenders. So, take note of the following points:

- Know What You're Buying

- Do A Title Search

- Get Insurance

- Check Into The Equity

- Work With Your Agent

Foreclosure property valuation is hard to be calculated, although the creditor has set an reserve price for the property, one should always do the research in the area to calculate the price of a similar property. Also the surroundings play a very important role; like connectivity of the area, market place, school, hospital etc etc. Always try to follow the biding before placing a bid of yourself as you may be bidding too high or too low. Also one tip for  first timers is that there is always going to be few investors lined up for such property, try to evaluate their bidding and play accordingly. Always bid in round figures (increase by 5000 or 10000)"

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