Foreclosed properties are everywhere in the market now a days. Once upon a time this was the best way to buy a cheap house which had been maintained well. They were sold off at cheap prices so that the lender could recover the balance mortgage amount. Things have changed and are not the same any more. There is an excess of foreclosed houses in the market and the poor debt ridden borrower has no money to even pay his monthly bills leave alone think of buying a foreclosed property.
Foreclosed properties that have been closed through the judicial system are more economical since in this case the discounts are larger. But the low down here is that these properties are kept vacant when the process of foreclosure is in progress thus they remain empty for a substantial period of time. In this case the lender looses money since the property in normal circumstances would have generated mortgage payments while in judicial custody generates none. Lenders incur loss and this is precisely the reason why they do not prefer to proceed with foreclosures.
Foreclosure properties are sold off at a discount and the discount is larger if foreclosure is occurring at an early stage of the loan. The percentage of discount depends on many factors like type of house, condition and maintenance, loan type, location of property and seller attributes. Foreclosure laws are defined by local governments there can be variations in the time taken and the cost of the foreclosure process. This cost also decides the discount at which the property would be available.
Appraisals of properties also play an important role in foreclosures. Borrowers who are able to pay small down payments might have no equity if there is a slight drop in home prices. This increases chances of default and the loss associated with it. Appraisers provide different types of reports that range from full appraisals to drive by appraisals. Full appraisal involves detailed inspection of property, location and neighborhood while drive by appraisals are less detailed. Electronic appraisals are also conducted. Appraisals are considered important in loans where low down payments have been given. Low equity loans with low down payments would yield lower foreclosure price due to the appraisal method used. Detailed appraisals would definitely yield higher values.
Behavior of borrower can also affect the price of the foreclosed property. Owners who have maintained their homes well and have not let it depreciate over time would get more value for their properties in foreclosure auctions due to appreciation and property values. Judicial settlement lowers resale price of property. But the bright side of the process conducted judicially is that the papers of the property would be in perfect condition and the new owner has no need to worry about them. Judicial deficiency judgment grants more power to lender which ends the foreclosure process quickly and reduces the time of holding which deteriorates the property and its value.
Thus the value of a foreclosed property depends on many factors.
