i also don’t really get “foreclosed” i’m guessing it means they’ve missed mortgage payments?
Edit: thanks everyone, lots of good info here!
In: 4
You owe money on a house. You stop paying. The person or bank you owe money to then initiates foreclosure. Numbers may vary, but:
You have 90 days to make up arrears. If you fail to do so, the full amount is due at 90 days. Then a notice of sale is sent, usually saying the house can be sold in 21 days.
After 21 days the house goes up for auction. The bidding often starts around what is owed (including foreclosure and selling costs), which is usually, especially in the current housing market, far below the actual value of the house. The people bidding usually intend to buy it, fix it up, and resell it, so the highest bid usually doesn’t get anywhere near what the house would sell for. The house is also sold as-is, no inspections, and that naturally means its sale price will be lower than a regular sale (which comes with inspections, etc.). The former owner gets the leftover money, if any.
Thus, you buy foreclosure homes because you can get them on the cheap and make a profit reselling. Sometimes individuals may be interested, but individuals usually don’t want to buy a house without inspection even if it does come cheap. Even in such cases it’s going to be that special person willing to take the risk and with the money to fix anything wrong.
Now if you’re behind on the mortgage and what you owe is more than the value of the house, you can agree to a short sale with the bank as an alternative to foreclosure. You let the bank sell it right then. The bank will usually take the loss, and you’re out from underneath the mortgage (this happened a lot in the 2008 housing crash). If what you owe is less than the value of the house (more likely today), then you should be able to sell it to get market value, pay off the lender, and walk away with far more money than you would have gotten in a foreclosure auction.
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