Home buyers who were expecting to purchase homes at discounted prices in foreclosure auctions were surprised to find out that banks are asking for higher prices to recover their investments.
Harmony Homes real estate agent Jimmy Marston likens finding a good deal in foreclosure auctions to searching for a needle in the haystack.
He said that lenders are asking for higher prices because homeowners owe them more on their properties.
People are losing their properties after just a few years of paying for it. This means that banks will have to sell the foreclosed properties at higher prices to recover their investments.
A study of land records for foreclosed homes in 2008 showed an average period of three years and nine months between the taking out of the loan and foreclosure. The size of a property’s outstanding loan principal is a major factor being considered by a mortgage lender when it sets the minimum bid price.
In Lynchburg, Virginia, out of 211 forfeited properties in the area this year, 180 were auctioned but failed to find a buyer. Instead, these properties were returned to the lenders’ portfolio.
A foreclosure auction is the final step in the binding agreement between the borrower and lender. Under the agreement, the borrower gives authority to the lender to sell his home if he defaults on his monthly payments.
In the event that the borrower missed a payment on his mortgage, the lender will charge him a late fee. Aside from that, the lender will send letters to the borrower or make telephone calls to remind him of his financial obligation.
If the borrower and lender failed to work out a deal that will allow the former to retain homeownership, the property goes into foreclosure proceedings. The lender will then hire a lawyer to help auction the property and recover its losses.
Leticia Carvalho has been educated in the finer points of the foreclosure market over 5 years.