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Foreclosed properties are homes that have been auctioned off by the courts and are usually sold at prices below market value, which attracts many investors. However, buying a foreclosed property has certain risks that need to be carefully considered before purchasing.

Why Do Foreclosures Occur?

The basic reason homes are foreclosed is because homeowners can no longer pay the mortgage. There are several reasons for this. First, people may have taken on too big a commitment in the first place, but were able to do so because of the attractive terms of a subprime mortgage. Before the housing crash, many people with low incomes and low credit scores were offered a subprime mortgage with low interest rates that made them seemingly affordable. When the interest rates and therefore the mortgage payments increased, they found that they didn't have sufficient funds to make the payments.

Another reason for foreclosure is the state of the economy. In a boom economy, house prices increase but in a recession house prices can fall dramatically. That can mean that the value of the house turns out to be much less than the mortgage owed on it. In this situation, the homeowner often has little choice but to foreclose. House prices are also likely to fall in areas where there is an oversupply of newly built homes, which investors are now unable to sell due to the fall in the market.

The Auction Process for Foreclosure Properties

The foreclosure auction process differs from place to place. Sometimes, state law governs the timing and bidding process, but not always. In almost all home foreclosure auctions, the foreclosing lender bids first at the auction, usually submitting the bid before the sale starts.

Things to note when attending an auction

• Understand the auction rules: Auction rules vary by location, so it is important to know them in advance.

• Prepare enough funds: Auctions require cash payments, and the winner must pay immediately.

• Conduct a property survey: Foreclosed properties may have hidden problems, so it is recommended to hire a professional to conduct an inspection.

Great Advantages of Buying Foreclosed Properties

• Competitive Advantage: Sellers prefer all-cash offers, and buyers can avoid the risk of not being able to secure a loan.

• Lower Purchase Price: You may be able to win the home with a lower bid.

• Faster Transaction Speed: Many transaction costs and delays are related to mortgages. Skipping the loan process can speed up the transaction and reduce costs.

• No Monthly Payments: No need to worry about interest rates or monthly mortgage bills.

• Immediate Ownership: There is no risk of a lender canceling the mortgage redemption, and you own 100% of the property.

How to Find a Foreclosure

1. Foreclosure real estate agent

Find a real estate agent who specializes in foreclosed properties. Search for agents in your area who have foreclosure experience. Your agent will be able to guide you to foreclosure property listings on the Multiple Listing Service (MLS) — a database to which consumers do not have direct access.

2. Check Zillow

Of course, you can also find pre-foreclosures and bank-owned properties for free through Zillow. Go to Zillow.com, enter your search area and click 'Listing Type.' Then select 'Foreclosures' in the 'For Sale' section to view what's available now. For what may become available in the future, select 'Foreclosed' or 'Pre-Foreclosure' in the 'Potential Listings' section.

3. Newspaper

A requirement for filing a foreclosure is that the Notice of Sale be published in the local newspaper of record. Check the legal notices in your local paper to find real auction houses operating in your area. Once you’ve identified several legitimate companies, go online to check their websites for listings and upcoming auctions.

4. Bank websites

Some banks — especially larger ones — list inventory of foreclosed properties on their websites. The sites are generally searchable by state and city and include prices, photos, descriptions and agent contact information for each listing.

Some lenders hire asset management companies to handle their foreclosure listings, so it's worthwhile to check those websites as well.

5. Government agencies

Some government agencies require that offers be submitted through a real estate agent, while others will accept them directly from consumers. Check websites for online foreclosure listings and purchase procedures from agencies including: Fannie Mae, the Federal Housing Administration, Treasury Department and Small Business Administration.

6. Public records

Throughout the foreclosure process, various legal notices must be filed in your County Recorder's Office. This information is public record and available to anyone. Just visit your county's office and you can search for a Notice of Default (NOD), lis pendens or Notice of Sale. Two benefits to searching public records? It's free, and you may find newly posted properties that haven't yet reached many of the online foreclosure data providers.

7. Do a drive-by

Tour the neighborhoods in which you’d like to buy and check for real estate signs; you’ll likely see some marked “Foreclosure” or “Bank Repo.” Call the agents whose names are on the signs and ask about other foreclosure listings that may be coming on the market — you just may get a jump on other buyers by asking about new foreclosures not yet listed.

8. Auction houses

Auction companies often hold huge foreclosure auctions, sometimes selling hundreds of properties in a single day. Experts disagree about whether auctions are great places to buy foreclosures; sometimes the excitement of bidding falsely escalates prices, and there are risks to buying properties “as is.” But it is possible to find deals — as long as you do your homework.

Bank of America Helps You Buy a Foreclosed Propertie

If you decide to buy a foreclosed property, we will provide you with comprehensive financial planning support to ensure that you make informed decisions throughout the process.

• Exclusive Advisory Services

• Extensive Real Estate Resources

• Fund Management Services

• Streamlined Transaction Process

How to Get Started?

If you decide to purchase a property with cash, Bank of America will be your most reliable partner. Our professional team will help you plan your funds, find your ideal property, and simplify the transaction process, ensuring that your home buying experience is smooth and enjoyable.

Contact our real estate advisory team now or visit our official website (https://www.bankofamerica.com/mortgage/home-mortgage/) for personalized services and more information. No matter your home-buying budget, Bank of America will provide you with customized solutions to help you achieve your dream home.