In some states, the former owner, and others claiming through the owner - such as other creditors, a spouse, or heirs - have what is called a statutory right of redemption. The law gives the owner a certain time period to reacquire his or her property by reimbursing you the foreclosure purchase price, plus expenses, plus interest at a rate described in the statute. Foreclosed owners in some states have one year to do this. Other states have shorter time periods, or give the statutory right of redemption only if the purchase price was significantly less than the property value. The RealtyTrac website has this information for each state.
You can do that, provided the lender was the highest bidder at the auction. This is frequently the case, however. In former days, you would approach the Owned Real Estate (ORE) department of the local bank or savings and loans, and negotiate a purchase of the property. Today, loans originated in your hometown are usually sold to investors with headquarters in other states. Those investors are very large companies with huge bureaucracies. It can be very difficult to find the right person in charge of foreclosed property and then be lucky enough to discover that person has the authority to negotiate a sale. Usually, foreclosed property is listed with a local real estate agent for sale.
Real estate agents who list foreclosed property usually place some sort of banner or other notice over their ad, indicating that the real estate is a foreclosure. That is to generate interest, because most buyers will assume the property is being offered at a bargain price. In actuality, it will be offered at the appraised value. The company will accept any offer that is within a certain percentage of the list price.
Those percentages vary among companies. After some period of time - exactly how long is another secret of the trade - they will accept any offer at all. If interested in this method of investing, make low-ball offers on several properties over the course of a year. You might get lucky and have a contract. The worst case is that the dialogue with different real estate agents will give you an excellent education in the field, so you can fine-tune your tactics in the future.
Technically, you can purchase the right of redemption. It does not necessarily mean you can be confident that no one can redeem and take the property back. Depending on the wording of your state laws, many other people besides the former owner might have rights of redemption. If a lien holder who was wiped out in the foreclosure can reimburse you, obtain the property, and then sell it for enough to recoup its redemption price, its lien, plus a profit, it may do so.
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06282010
1. Real estate Investments
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