Chapter 2:
Top 5 Questions About Foreclosures

Let's start by answering the top five questions people ask about foreclosed properties auctions...

1. What exactly is a property foreclosure?
   A "foreclosure" is any form of real estate (such as a home, commercial building, raw land, etc.) that is repossessed by the lender because the buyer has defaulted on his or her mortgage. Buyers default for many reasons, including job loss, divorce, bankruptcy and ill-health.

 
2. Who offers foreclosures for sale to the public?
   Foreclosures are normally offered by government agencies (like HUD, the VA and IRS) and by commercial lenders (such as banks, savings & loans, mortgage companies and insurance carriers). There are literally thousands of public and private sources who fund mortgages each year, and - when necessary - repossess property for non-payment.

 
3. What happens after a property is foreclosed?
   In many cases, a "foreclosure auction" takes place, where the property is sold quickly to the highest bidder. In other cases, the lenders simply take back the property and put it in their inventory of "owned" real estate to be sold on the open market by a designated agent. (The term "REO" comes from this transaction. It means that the property is now "real estate owned" by the lender).

 
4. Can foreclosures really save me money?
   They certainly can, especially if you do your homework and shop around! Recognize that banks, government agencies, and other lenders who repossess real estate are not in the property management business - they are in the mortgage lending business. Consequently, they want to sell these properties as quickly as they can, within reason.
   
   But keep in mind that not every foreclosure is a great deal. Consequently, you should compare foreclosure pricing with comparable properties in the same neighborhood. That's why - when you're searching for a foreclosure, or any bargain property - it's so important to access a large volume of available properties. The more properties you research, the better your chances of finding a terrific deal! That's where Bargain Network can add so much value...because our Bargain Real Estate Locator helps you search quickly and easily - by zip code and by price - through a vast national database of properties, including some 15,000-30,000 foreclosure listings.

 
5. What's better... buying property at a foreclosure auction, or through
   REO-type listings?
   Bargain.com knows a great deal about auctions. In fact, for nearly 10 years we've been one of the nation's leading auction authorities...providing some 2 million people with current information on live auction events in all 50 states. Based on that experience, we've learned that live auction events can provide fantastic opportunities for bargain pricing on cars, trucks, appliances, furnishings, office equipment, jewelry, antiques and other big ticket merchandise. But foreclosure auctions - which can yield outstanding real estate bargains - pose significant hazards not found in the REO marketplace...especially for inexperienced buyers. So, before heading out to a foreclosure auction, you need to carefully consider the following major risks:
    
   • When buying property at a foreclosure auction, there may be unknown physical problems with the structure - or geological problems with the land - that are hidden from you. Keep in mind you do not have the same inspection rights at foreclosure auctions that you have when you are shopping for REO-type foreclosures. In addition, many states exempt foreclosure auction sales from full disclosure laws.
   
    
   • There is normally no financing offered at a foreclosure auction...these are strictly cash deals. But if you purchase an REO-type foreclosure from a bank or government agency, you can often get excellent financing terms. For example, the federal Department of Housing and Urban Development (HUD), provides very attractive loans with extremely low down payments (as low as 3%), for ordinary working people...even if they have some past credit problems.
   
    
   • A foreclosure auction will not eliminate past-due taxes or senior liens on the property, and the purchaser is obligated to pay those debts. But when you buy an REO-type foreclosure, in virtually all cases, you will be buying a lien-free, debt-free property.
   
   
   The bottom line in all of this is that foreclosure auctions offer the opportunity for significant savings, but they carry far greater risks than shopping for REO-type foreclosures. So, unless you are a professional real estate investor - who can pay 100% cash for your properties - you're probably better off steering away from foreclosure auctions and focusing instead on searching out REO-type foreclosures.
   
   Fortunately, Bargain Network maintains the nation's premier database of REO-type foreclosure listings, along with thousands of other bargain real estate candidates...such as "for sale by owner listings" in every state. Call Bargain Network anytime, or click to "Homes" on this website for updated access to these listings.