Foreclosure is a word you have heard a lot from lately. More and more Americans are considering foreclosure, while others are enjoying the discounted sales prices that come with foreclosures. Buying a foreclosed home will save you thousands. Lenders price their foreclosures based on current appraisal snapshots of the current real estate market.
The sales price usually reflects the low end of what homes of equal size and age are selling for in the current market.
You will have to deal with the lender in the transaction instead of an individual seller, so make sure you have a realtor involved to assist you with negotiating as they have experience with foreclosure lenders.
If you are contemplating foreclosure on your own home, there are some factors you want to first consider.
Your credit will be destroyed after a foreclosure. The lender will report you late each month for up to 2 years before moving it into a collection status. This will lower your credit score hundreds of points. Foreclosures stay on your credit report for a total of 7 years. You will be required to wait 3 years after the foreclosure to purchase a home again. Of course, if we get the foreclosure deleted you can purchase sooner than 3 years.
You will also be left with a deficiency balance. This is the difference between what the lender eventually sells the home for and what you actually owe. The bank can then pursue you for this money and go as far as taking you to court and rarely even garnish your wages.
If you are even thinking about a foreclosure, consider a short sale first. This will relieve you from the deficiency balance and will not have nearly the adverse impact to your credit profiles.