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How to Buy a Foreclosure in Northern Virginia & Washington DC

All the real estate talk in the DC metro region nowadays is about finding great deals. Most of the deals can be found through foreclosure homes in Northern Virginia and Washington DC. However, the process can be more complicated and risky than one may think. Here are some things you should know:

There are three different stages of foreclosure, each of which presents different opportunities for buyers. The first step is to figure out which one makes the most sense for you.

Pre-foreclosure

A home goes into pre-foreclosure when a borrower has fallen behind on his payments, but the house has yet to be auctioned off. Homeowners are looking for a way to get the financial burden off their back. So it’s not a bad idea to look over the delinquency notices that lenders file with county courthouses when a borrower misses a payment.

Owners are usually open to doing a short sale which is when the buyer pays less than what they actually owe on the mortgage. Banks are reluctant to do these such deals because they take a loss. It can take months before a deal goes through and even after that long period of time, there is a chance that the bank will not accept it.

In this market, we’re finding that the banks are more inclined to agree to the short sales. It makes sense for them to liquidate early rather than going through the foreclosure process costing lenders around $50,000.

Do not be turned off by dirty carpets or ugly paint jobs. That’s where the best deals are.

Sheriffs’ sales

In the next stage of foreclosure, homes in default are auctioned off on the county courthouse steps. These homes can be real bargains, but the process is a crap shoot.

There are downfalls that can arise with this type of process. Bidders cannot inspect the property prior to the auction so there is no telling what needs to be fixed. You also run the risk of buying the home with liens still against it because of unpaid taxes which can jack up the cost of the home. Finally, the kicker, buyers need to come with cash ready to put down 10%-20% and pay the rest in a matter of days. So if you want to buy on the courthouse steps, you’d better be a pro.

Even after a purchase, a deal can fall through if the current owner can come up with enough cash to repay the buyer the amount of the winning bid.

Post-foreclosure

After a lender takes back a house, the property goes back on the market as what’s called an REO (real estate owned) property. These are treated like ordinary sales, listed with a broker. Typically, bargains are not as sharp.

Young, hungry real estate agents are the ones that are usually screening REOs all the time. Go out and find one and put them to work for you. These are a lot less risky because the process is so clean; the title is clear and the property is delivered vacant.

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