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Government Foreclosure And Bank Foreclosure, What You Need to Know

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By : Roby Hicks    99 or more times read
Foreclosure has brought several problems in real estate market and in the economy as a whole. This has caused the property prices to drop and it will take a while for the industry to recover. Although we understand foreclosure in general, many are confuse with some of its type. For instance, what is the difference between the government foreclosure and bank foreclosure? These are two common types of foreclosure but not all are familiar with it. Here is some information you might find useful.

Bank foreclosure

This takes place when a borrower fails to pay his monthly dues. At first, a demand letter will be sent. Once the buyer continues to default, the lender will foreclose the property. Occupants will be requested to leave the property and it will be sold in an auction. Auctions are normally announced on local newspapers. Banks also post this in their bulletins.

The initial value of the property should cover the mortgage balance and foreclosure expenses. Bids will be made after that. The winning bid is not necessarily the highest. The property will be awarded to the bidder who can generate the highest net profit for the lender.

Government foreclosure

On the other hand, this takes place when a government insured property is foreclosed. Examples of government insured mortgage are the VA loans and the FHA loans. The VA loans make the mortgage more affordable to soldiers and military personnel who served in the past. There are some requirements to satisfy though. Meanwhile, the FHA loan is one that is backed by the agency. Those who qualify for this loan are those who have low income. This program makes the mortgage more affordable for them.

When the borrower defaults, the lender will turn to the government. The government in turn will pay the lender. To recover the loss brought by paying the lender, the agency will sell the property in an auction. Homebuyers will be prioritized. However, if the property is not purchased, it will be made available to the investors.

Purchasing foreclosed properties

You will normally purchase the foreclosed properties through auctions. Before you participate in such, see to it that you check the properties including their condition, location and current market price. This will help you decide.

If the mortgage is backed by a government agency and the borrower defaults, the government will pay the lender of the insured amount. However, the government repossesses the property and sells it in an auction to recover the money it lost. In a bank foreclosure, on the other hand, the bank forecloses the property after the borrower fails to settle his obligation. The bank or the lender sells the foreclosed property in an auction to recover the loss of unpaid mortgage.

If you wish to buy a foreclosed property, find more information about it. In addition to the location, you need to learn about the condition of the property as well. It is also essential that you know the market values of similar properties in the market to ensure that you do not pay more than you should for the property.
Check out the Foreclosed Homes for Sale in West Phoenix. Visit the Short Sale Homes for Sale in West Phoenix and the West Phoenix Valley Rental Homes as well.

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