With the Phoenix housing bubble burst and the subprime mortgage crisis, millions of homeowners found themselves unable to make their mortgage payments. Many found themselves owing more on the house than the home was worth. Many just walked away from their homes. As a result of these complicated issues, millions of Phoenix homes were foreclosed.
While this isn’t the only reason for which homes in Phoenix are foreclosed, it has been a widespread one. With all the foreclosed properties, there has also been extensive interest in buying these properties at a bargain price.
It is true that foreclosed Phoenix properties can be priced at a significant discount, but they are also a much riskier investment. Before making an offer on a foreclosed Phoenix property, do your due diligence.
Things you must do before buying a Phoenix foreclosure:
- Hire an Exclusive Buyer's Agent
- Do a title search - make sure that when you purchase a foreclosure that you are the only person who has any ownership claim
- Check for liens - find out if there are any liens against the property because you will be responsible for paying them
- Check for a second mortgage - you don’t want to be surprised by an extra mortgage that you will need to pay
- Know how good of a “bargain” you’re getting - foreclosures are sold “as is” and in many cases you will not be able to do a proper inspection. You may end up paying thousands of dollars repairing the property before it is fit to be lived in.
It is also important to consider that there are different types of foreclosure properties and each type comes with its own advantages and disadvantages. The different types of foreclosure purchases are:
- Real Estate Owned (REO), also called “bank owned”
A Phoenix pre-foreclosure is when you buy the home directly from the homeowner, before the bank officially forecloses. This type of purchase does not require as much capital as other foreclosures. Also, since you are purchasing straight from the homeowner, you will be able to gather all of the necessary information, such as inspection reports, title information, etc. that may not be available with other foreclosure properties. Once you own the property, you will be responsible for all future payments as well as any overdue back payments.
A Phoenix pre-foreclosure property will usually end up at an auction. Real estate auction practices vary by county but common practice in Maricopa County is for the auction to be held on courthouse steps, in front of the foreclosed home, or at the county clerk’s office.
Real estate auctions offer the best chance for a great deal but also hold the greatest risk. Auction properties are sold as is, with no opportunity for potential buyers to perform inspections. When buying a home at auction, the buyer must pay cash, usually a cashier’s check. It is also possible that there may still be occupants living in the home. In such a case, you would be responsible for the often costly eviction process.
Once a foreclosure has gone to auction and failed to sell, it becomes a Real Estate Owned, or bank owned, property. Most homes do not sell at auction, some fail to even get any bids.
An REO property is the least likely of the foreclosure properties to represent a bargain, but it is also the least risky. The property can be fully inspected, any title issues can be found and dealt with, and the sale can be subject to a mortgage. REO properties also tend to be in better condition than other foreclosure properties.
Still interested in buying a foreclosure property? If so, contact me!