Introduction to Foreclosure Properties

Foreclosed properties, or foreclosed homes, are typically homes in which the owners failed to comply with a lender’s agreement. In other words, the property owners failed to pay their mortgage repayments (that is, they defaulted). Often the home is of good quality but the previous owner in most cases simply could not keep up with their mortgage payments. This can be caused by rising interest rates if the owners have over-committed and their loan is too big, or from a loss of income through unemployment. When the owner defaults then the lender takes control of the property. Typically the lender sells the home to help to recover the outstanding unpaid loan. This is often done through a public auction. This situation can be very beneficial to a purchaser because the home can be auctioned off and sold at up to 50% less than market value. This is because the lender/bank does not want to hold on to all the real estate property that they repossess. Lenders are not in the business of real estate investment and, therefore, they tend to want to get rid of their property as fast as possible and recoup some money. The owner can also fail to pay his or her taxes to the government. In this case, the property then becomes seized and is, again, often sold via auction at substantially lower prices than market value. Again this is for the same reasons as outlined above; the government has no interest in holding onto real estate property. The government wants to sell within a short amount of time. This is why bargains are found at foreclosed property auctions.