Foreclosure is a legal process wherein a bank or financial institution acquires the property of the borrower due to failed repayment of the loan installments. Foreclosure is the last step that a bank has to take in case of a loan settlement. When any bank gives a loan to an individual, an asset is a mortgage for security purposes. When the borrower fails to pay the loan installments and interests, the bank is entitled to acquire the property ownership under legal clauses.
Foreclosures have become quite common in metro cities like Massachusetts. People take huge loans for professional as well as personal reasons. In cases of high loan amounts, banks prefer to keep collateral such as assets and property for secured recovering of the loan amount. Due to a rise in foreclosures in MA, the demand for buying foreclosed properties has significantly increased. Therefore, if you’re one of those interested in investing and buying foreclosed properties, here are a few basic things you must know about foreclosures.
Types of Foreclosure process
Foreclosures are mainly of two types i.e. Judicial and non-judicial.
- Judicial foreclosures – In this foreclosure, the acquiring and sale process is initiated under the court orders. When a lender fails to receive the loan installments on time, it can move to the court seeking legal actions against the borrower. Upon this case filing, the court hears both sides and concludes the case by ordering appropriate actions as per law.
- Non-judicial foreclosures – As the name suggests, this foreclosure process does not involve court or other legal bodies. On the failure of repayment, the lender can directly list the property for foreclosure in MA or send warning notices to the borrower. This process is carried out based on the agreement signed between both parties stating that the lender has the right to acquire the property on failure of repayment.
Essential factors to look for while investing in foreclosed properties
Buying foreclosed properties can fetch you profitable deals if you know how to locate and invest in the right property. While there are plenty of properties listed daily on the foreclosures list, not all of them are ideal and profitable for you. There are some basic factors that you must consider before choosing the right property to invest in.
- Reason for foreclosures
This is one of the vital things that you must find out before buying a foreclosed property. Foreclosures can happen for a variety of reasons such as financial distress, death of the borrower, or intentional giveaway. Knowing the genuine reason behind the foreclosure process can help you avoid future complications. For example, you buy a property that went into foreclosure due to the death of the borrower. Some relatives of the borrower might come up and claim the property in the future. In such situations, you will have to go through unnecessary trials and settlements. Therefore, knowing the foreclosure reason can help you decide better whether to invest in the property or not.
- Location and condition of the property
Another crucial factor to consider before purchasing a foreclosed property is the location and the present condition of the property. If you’re looking to invest or live in a new place, knowing the surrounding is important. You can determine the upcoming development and rising value of the property by assessing the location of the house or land. Furthermore, the present condition of the property must be evaluated too. You would not like to purchase a house that is not in a liveable condition and requires complete renovation. Even if you are ready to renovate or spend extra money on the property, you can decide and pay a suitable price to the homeowner or bank.
- Payment options
Since foreclosures are done for immediate loan recouping, you would require to pay a huge sum of money at once. The normal payment options might not be available in cases of foreclosures in MA. Whether the property is in pre-foreclosure or the auction phase, money retrieval is the key concern. The bank or the homeowner whoever is selling the property needs an immediate value of the property to get rid of the outstanding loan burden. Hence, make sure you are well aware and prepared for the payment options before initiating the purchasing process.
Foreclosures are legal and genuine property sale process that aims to retrieve the money by selling the loan collateral property. Knowing these basic aspects of foreclosure can help you make profitable deals in the foreclosure market. While you are going through the foreclosure listings, make sure to check factors like location, foreclosure reasons, and payment options before moving forward with the property dealings.