When a property is sold through a foreclosure action, it means that the property owner was not able to keep up with their monthly mortgage payments. After a certain number of missed payments, the lender is legally permitted to take possession of the property and sell it at auction in order to recover the outstanding debt on the property owner’s mortgage loan.
Therefore, when a person buys a foreclosed property, it means they are purchasing property that the previous owner failed to pay the property taxes on or make the mortgage payments.
Depending on the type of foreclosure action and which stage of the foreclosure process that the property is in, buying a foreclosed property can either be a relatively simple or an extremely complex transaction.
For instance, a buyer may be required to purchase the foreclosed property at a higher sale price. The buyer may also have to resolve several legal issues with various parties before officially acquiring the property. Additionally, the buyer will need to comply with a number of state foreclosure laws, which can sometimes be difficult to interpret without legal expertise.
Thus, if you are interested in buying a foreclosed property, you should consider hiring a local foreclosure lawyer to assist you with the purchase process. A lawyer can inform you of your state’s foreclosure laws and provide advice on how to find a foreclosure property with a straightforward purchase process. A lawyer can also inform you of the potential consequences of buying a foreclosed property.
Will I Work with the Lender or Property Owner When Buying the Property?
As previously discussed, the process for buying a foreclosed property will largely depend on three factors:
- The type of foreclosure sale that occurs;
- The stage of the foreclosure process that the property is currently in; and
- The foreclosure rules of the jurisdiction in which the property is situated.
Accordingly, the answer to whether a person buying a foreclosed property will work with a lender or property owner will vary on an individual basis. For example, if a lender or the county is responsible for selling the property through a foreclosure sale, then a buyer should not expect to close the deal right away. A buyer should also not anticipate that the parties will immediately reach out to them about their interest in purchasing the foreclosed property.
Generally speaking, the majority of property foreclosure sales are usually supervised by an assets management department. In some instances, it can be difficult for a buyer to get in contact with someone who works at an assets management department.
Additionally, it is often easier for a buyer to purchase a foreclosed property while it is in the pre-foreclosure stage. This is because a buyer will normally work directly with the property owner to initiate the sales transaction during this part of the foreclosure process. This gives a buyer more opportunities to negotiate and discuss the deal with the actual property owner, as opposed to a mortgage lender, the bank, or a county sheriff like they would at a later stage.
Can I Negotiate for the Lender or Property Owner to Make Improvements?
In general, the property being purchased in most foreclosed property sales will normally be sold “as is.” This usually means that what a buyer “sees”, is what the buyer will get in exchange for their money.
The phrase “as is” also means that the buyer accepts the idea that they are purchasing property that could be sold in any condition, ranging anywhere from brand new to good to in need of serious repairs. For instance, a buyer may purchase a property that has a leaky roof or contains a broken staircase.
To prepare for this sort of occurrence, many states have adopted “buyer beware” laws. Buyer beware laws, also known as “caveat emptor” laws, basically inform the buyer that they will have the burden of performing due diligence on and researching the conditions of a foreclosed property if they intend to purchase it. Buyers must also complete these tasks prior to buying the foreclosed property in question.
On the other hand, caveat emptor laws protect the seller of the foreclosed property from future liability and buyer remorse. For example, the buyer had a duty to properly inspect the foreclosed property before purchasing it. If the buyer neglects to perform this duty and is then unhappy with the purchase, the seller is not at fault.
In other words, buyer beware laws serve to protect the seller from a lawsuit if the buyer attempts to sue them for buying property that is in poor condition. The buyer could have prevented it from happening, so the seller should not be held responsible according to these laws.
In addition, the buyer should have known in advance how much to spend on the property because their offer would likely be contingent on the condition of the property itself. For instance, if the foreclosed property is in need of major repairs, then the buyer should adjust their bid by factoring in post-purchase expenses, such as hiring a contractor or paying for building repair materials.
In doing so, however, a buyer is not permitted to make any deceitful remarks or misrepresentations about the property during the negotiation stage of the sales transaction. If the buyer attempts to manipulate the cost of repairs that need to be done on the property for the purpose of reducing its sale price, then their actions may constitute a contract violation. A violation may result in a lawsuit against the buyer as well as may invalidate the contract.
What Happens If I Purchased Property with Tenants Living in It?
Before the law was modified in 2009, a tenant who lived on a foreclosed piece of property would have to give up their lease and would then be forced to either find a new place to live or pay the updated price on the lease.
Now, however, a law called the Helping Family Save Their Homes Act of 2009 provides some protections for tenants. Specifically, the terms of a current tenant’s new lease will survive and continue as is both during and after a foreclosure sale occurs. It is important to note that this rule may vary depending on the terms of an individual tenant’s lease conditions and on the laws of their particular state.
For instance, a tenant who lives on a foreclosed property and has a month-to-month lease term will be required to leave that property after receiving a 90-day notice (or whatever length of time is prescribed according to the laws of the state in which they reside). This guideline will apply to various lease terms, such as for a week-to-week tenancy, a year-to-year tenancy, and so on. It is not solely reserved for month-to-month tenancies.
What Does Statutory Redemption Mean?
In general, statutory redemption refers to a type of law that enables the original owner of a foreclosed property to regain ownership of the property after it has been foreclosed on by a lender or creditor. Basically, these laws give homeowners a chance to redeem foreclosed property if they are able to pay the price that the property was sold for at a foreclosure sale.
However, there are two important things to bear in mind about statutory redemption laws and repurchasing foreclosed property. The first is that the homeowner must repurchase the property within a certain period of time. In most cases, the prescribed time frame is usually around one year.
The second and more notable item regarding statutory redemption laws is that they are only recognized in a handful of states. In contrast, most states typically follow the rules for the equitable right of redemption standard. This standard permits homeowners to repurchase the property prior to the foreclosure sale, as opposed to during or after the foreclosure sale as they would under the statutory redemption guidelines.
Accordingly, both the original owner of a foreclosed property and its prospective buyer should review the relevant state laws before taking any further action with the property. The parties should also consider hiring their own separate counsel to ensure that they understand the way in which the applicable statute operates, along with the potential consequences of such a purchase.
Do I Need to Talk to a Lawyer about Buying a Foreclosure?
As discussed above, foreclosed properties are usually sold “as is.” This means that the buyer of a foreclosed property will generally have little chance of legal recourse if they discover that the property will require more renovations than they had initially anticipated. In this instance, it is not entirely necessary for the buyer to retain an attorney before purchasing the foreclosed property.
On the other hand, if the property purchase occurred during the pre-foreclosure stage and the seller made material misrepresentations about the property, then there is a greater possibility that the buyer will have an opportunity to recover financial losses they may have suffered due to the seller’s material misrepresentations. For example, if a seller did not have the right to sell the property and engaged in serious efforts to prevent a buyer from discovering this fact.
Thus, if you are currently facing such a scenario or are interested in buying a foreclosed property, then it may be in your best interest to consult with a local foreclosure lawyer for further legal advice. An experienced foreclosure lawyer will be able to assist you in building a case against the seller and can discuss the types of remedies you may be able to recover if the case is successful.
Your lawyer can also help you to avoid these sorts of situations in advance. Additionally, if you need guidance in buying a foreclosed property or are having other issues with purchasing foreclosed property, your lawyer will be able to inform you of your options and can assist you in resolving these issues as well.
