Buying a foreclosure in Austin can seem like a daunting proposition. One in 13,000 homes in the United States is foreclosed on; while that figure isn’t as high as it was in 2008, when a record three million homeowners received a foreclosure filing, it’s still pretty considerable. While the foreclosures obviously are incredibly stressful to the former occupants of those houses, they do happen, and they can present a unique opportunity to investors and/or future homeowners. So how does buying a foreclosure work? What kinds of concerns should you have? And is it really worth it?
We’ll explore the answer to these questions and others here as we discuss how to buy a house in foreclosure in Austin.
The Foreclosure Process
The foreclosure process in Texas starts when a homeowner defaults on their mortgage payment. Typically, foreclosure proceedings don’t begin after just a single missed payment, however; it’s usually about 90 days from the defaulted payment before the foreclosure proceedings are initiated. Throughout that 90 day period, the mortgage lender tries to work with the homeowner to figure out a better payment plan for them, sometimes even offering another mortgage to lower their payments or a similar arrangement.
Most of the time the homeowner tries to do everything they can to hold onto their home, but job loss, major medical problems, family troubles or other problems arise and can make it impossible to keep their home. In this case, foreclosure proceedings are initiated. From this point, the lender issues a notice of sale. The house is slated to be sold 21 days from the issue date of the notice of sale.
At the date of sale, the house goes up for public auction. It will be sold to the highest bidder, who must put up all of the money for the house at once. The buyer is issued a trustee’s deed, which effectively makes them the owner.
Often, buyers can purchase foreclosed houses on the cheap because in the end, the bank or other lender just wants to recoup the mortgage they’re still owed. This has made foreclosed houses a lucrative business opportunity for investors, DIY homeowners in search of a fixer-upper and others.
5 Common Foreclosure Risks
While the process is quite simple, buying a foreclosure can be fraught with complications. Let’s discuss 5 of the most common problems with buying a foreclosure in Austin.
1. Foreclosures are sold in “as-is” condition.
This means that you may not know the condition of the house until you physically get inside of it. If a house has been left unoccupied without any kind of regular maintenance or work for a period of time, it may not withstand damage from the elements very well. The buyer inherits all responsibility for the property, including damage to the house or property itself.Securing financing can be difficult.
2. Lenders may not approve a loan in time for you to purchase the house, or they may stipulate difficult terms and conditions if they do. To minimize the chance of this happening, it’s recommended to secure pre-approved financing prior to purchasing the home.
3. Additional transaction costs on a short sale or foreclosed home may drive the price up.
There’s no point in buying a foreclosure in Austin at bottom dollar if transaction fees and other charges drive the price through the roof. Some of these fees can include years of past-due HOA or condominium association fees that are not specified in the sale of the property, serious gutting or damages that are irreparable or nearly so, lender transaction fees and more.
Make sure to do plenty of research on the property you’re interested in before you commit to that investment, so that you don’t end up with a huge debt hanging over your head that will make buying a house on the cheap seem like a terrible idea.
4. Foreclosed property listings are not as available as other home listings on the market.
Sometimes you end up just purchasing a property at auction, sight unseen. This makes it difficult to do any kind of research beforehand, and it limits your options further if you end up with a real dud. Best practice is to always try to visit the property in person before committing to buying a foreclosure in Austin.
5. Be prepared for the possibility of a homeowner exercising their right to redeem.
A right to redeem is a right that can be exercised after the sale for a limited period of time. If the homeowner exercises their right to redeem, in Texas, the right to redeem is generally protected for up to two years, and if the original homeowner is able to pay the fines, interest, court costs and judgment fees they can legally reclaim their home. This doesn’t happen frequently — the nature of the foreclosure process is set up to ensure that it doesn’t — but it can have adverse effects upon your interests in the property if it does.
Love Texas Houses
At Love Texas Houses, we specialize in helping our clients buy and sell foreclosed properties successfully. Ultimately, we want to make sure that you are getting the best bang for your buck, and we consider that we are really in the business of helping people, not so much the business of selling properties. If you have any questions about buying a foreclosure in Austin or any other property concerns, contact us today. We’d love to hear from you.