There always seems to be a "hot topic" that draws the public's attention. In the last 2-3 years foreclosures have taken over the media and it seems that every day there are news and articles written about this topic. I recently read an article on Trulia.com that mentioned some of the interesting myths around foreclosures:
- Foreclosures Happen Quickly
Not necessarily - in many states the foreclosure process takes at least 6 months. However, the Home Affordable Program of the Obama Administration, while it has not prevented many foreclosures, it did slow them down. It seems that all parties (the banks, the government and the homeowners) want to delay the process rather than bite the bullet and resolve it quickly. As a consequence, many homeowners are staying in their homes 9, 12 and even 24 months before they get evicted through foreclosure.
- Buyers of Foreclosed Properties Cannot Get Clear Title or Title Insurance
With all the news about wrongful foreclosures being reversed, title insurance companies tightened their standards for banks, so banks make sure they follow the letter of the law and that the homeowner is legally in default and the paperwork is done right. Presently there are still some challenges for lenders to clear the title, but most times this happens before the property is sold to an unsuspecting buyer. The new buyer's lender will make sure that title is marketable and insurable. In reality this risk is minimal if buying lender-owned properties. People who buy foreclosures at auction for cash take a higher risk.
- Buyers Should Wait for the "Shadow" Inventory to be Released
It has been well publicized that banks are holding many homes that are in default but not yet foreclosed on as well as foreclosed homes in their inventory. Some buyers are holding off, waiting for the "floodgates to open". The banks are not stupid, they know that if they release all the homes at once, prices will collapse. They will dispose of their inventory in a rational, organized and gradual way to get their best return. So if you see a home that fits your need at a good price, buy it now, don't wait for the expected over-supply. It may never come.
- In Order to Get a Bargain, You Must Buy a Foreclosure
The first thing that comes off many buyer's mouths is: "We want a deal!". And generally, they think that they must only look at foreclosures to find it. The truth is that today's sellers are motivated and know they will have to compete with short sales and foreclosures, otherwise they will not sell! And "normal" homes are generally much better maintained and much more negotiable in terms than lender-owned homes.
- Having a Foreclosure on Your Credit Report Means You Will Not Be Able to Buy a Home For a Long Time
I have to confess that I thought that was the case too. I thought a foreclosure on your credit score meant no home purchases for the next seven years. But the article argues that FHA has relaxed their guidelines and now homeowners who have a foreclosure in their credit record can buy another home with only 3.5% downpayment as soon as 3 years after. However, they will have to comply with other tight criteria: They will need to bring up their credit score to 620-640; they must have perfect credit record (no lates, collections) in the past 24 months; and they must have had continuous employment for the past 2 years, among other things.
Interested in buying foreclosures? Click to see a list of foreclosures in Mt Pleasant.