Whether you are a buyer who is interested in purchasing a home that has gone into foreclosure, a homeowner who is struggling to keep up with payments or a seller who is competing against foreclosed properties in your area, there are many myths regarding foreclosure that you need to learn more about. In fact, failure to learn the truth behind these myths can be quite costly. Here is a look at five common foreclosure myths and what you need to know about them.
Myth #1: I Can’t Get a Clear Title of Title Insurance if I Purchase a Foreclosed Property
Due to issues concerning the foreclosure documentation process, there was once a time when several major title insurance companies were unwilling to issue policies on bank-owned homes. Now that the process has been revamped , however, this is no longer the case. Furthermore, nearly every jurisdiction in the country has measures in place that protect buyers of bank-owned properties from experiencing title attacks by the previous homeowners. While it is true that there may be several title issues that need to be resolved when purchasing a foreclosed property, obtaining a clear title and getting title insurance is not an issue in most cases.
Myth #2: Foreclosing on a Home is a Quick Process
While it is true that the legal process of foreclosing upon a home can take as little as 6 months to complete in some states, the reality is that the average foreclosure takes much longer to complete. In fact, a recent JP Morgan Chase study found that it takes an average of 14 months for a homeowner to lose his home to foreclosure in the United States. In some states, the average is much longer. In Florida, for example, it takes an average of 26 months while New York homeowners average 26 months to complete a foreclosure.
Myth #3: It is Best to Wait for the Release of Shadow Inventory When Purchasing Foreclosed Property
While banks have acknowledged that they do have a list of foreclosed properties that have not been put up for sale yet, waiting for that list to come out in order to get an even better deal is a foolish mistake. In fact, the banks have stated that they hold back on properties specifically so home values don’t get pushed down further. So, don’t expect a huge influx of shadow homes to hit the market any time soon. Rather, in keeping with their past practices, you can expect the banks to simply release a new property after selling one that has already been listed.
Myth #4: The Only Way to Get a Good Deal is to Buy a Foreclosure
If you are looking to get a great deal on a home, you don’t have to focus solely on foreclosures. In fact, due to the large number of short sales and foreclosures that are currently on the market, home prices in general are quite low. Furthermore, individual buyers are often far more willing to negotiate perks, such as taking care of necessary repairs or modifying the closing date, than a bank selling a foreclosed home will be. Another benefit to purchasing an individually owned home is that these homes are typically in move-in condition, whereas this isn’t always the case with a foreclosure. This is not to say that you can’t find great deals with foreclosures, just keep your mind open to other possibilities as well. You just might be surprised by the deals you can find.
Myth #5: It Will Be Years Before I Can Buy a Home if I Go Into Foreclosure
While it was once common practice to have to wait five years before purchasing a home after a foreclosure, this is no longer the case. In fact, for those who qualify for an FHA loan, it is possible to purchase a new home in as little as three years after foreclosure. Of course, you will have to take steps to increase your credit score following your foreclosure, which means you can’t have any late payments or other credit issues. You may also need to provide documentation proving that you have paid your rent on time for the past one to two years. Still, it is possible to purchase a home sooner than you might think following a foreclosure.
Jim Olenbush is the owner of Cantera Real Estate, http://www.jimolenbush.com/ in Austin, Texas. Jim manages a team of experienced Austin Realtors and they specialize in luxury real estate sales.
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