Litchfield Park Foreclosure Market Opportunity

Years of increased real estate valuation lacking sustainable levels of income created housing bubbles in communities across the United States as well as worldwide. When Arizona's housing bubble burst in 2007-08, the Litchfield Park area west of Phoenix was especially hard hit with foreclosures. Hundreds of foreclosed homes flooded the market in various states of default, ready for auction, or bank-owned.

Undoubtedly, loss of the Litchfield Park foreclosure properties disappointed the affected home owners. But, the glut of foreclosed properties created a long list of affordable options for buyers with adequate funding. The foreclosed properties presented an opportunity for well-financed buyers to invest in real estate at substantially reduced prices.

Using Knowledge of the Foreclosure Process

By understanding the stages of the foreclosure process, a buyer can choose the best strategy for tendering an offer.

Although specifics are defined by statute, the foreclosure process always begins when a home owner fails to make agreed mortgage payments. Typically, after 60 days without sending a mortgage payment the home owner is served a Notice of Default from the lending institution. This action becomes a matter of public record and allows the borrower 90 days to make the account current and reinstate the mortgage loan. Once this notice is served, filed, and recorded, however, public credit sources will generally reject further loan applications made by the home owner.

Foreclosure is the last resort of a lender to recoup the amount of the loan extended to the mortgagor, or borrower. If settlement between lender and borrower is not achieved early in the foreclosure process, the property is put up for sale at auction. If the property is not sold at auction, the property is classified as bank-owned.

Bank-owned properties are also called Real Estate Owned, or REO. When the foreclosure process reaches this point, the lender must dispose of the property in the best way possible to recoup the defaulted loan. Making a deal directly with the homeowner is not an option for buyers once the property becomes REO.

Strategies for Buying a Foreclosed Property

Of the three stages of foreclosure, the best option is to buy the property directly from the home owner early in the process. By doing so, the buyer procures valuable real estate at less than the property's market value, the seller relieves the mortgage debt with minimal damage to credit rating, and the lending institution saves the time and expense of further foreclosure actions.

By buying foreclosed property directly from the lending institution the buyer is usually assured of receiving clear title to the property. If a trustee is administering the foreclosure sale, the buyer can learn details about the property from the trustee, including the minimum bid the bank may be willing to accept.

Some investors avoid the auction route because of inherent risks involved, such as buying the property sight unseen.

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