It is no secret that bank “owned” homes that have been foreclosed upon have made up an increasing proportion of the overall residential real estate market. Financial news network CNBC is reporting that more Americans are now willing to consider buying a foreclosed upon property, but that they expect a big discount to do so.
The reason behind this demand for a discount: risk.
Would-be home buyers are right to see the risk in buying a foreclosed home, just as the big banks engage in risky behavior every time they try to foreclose on a house–particularly one with the loan made within the last 5-10 years. It is questionable, at best, as to whether banks today have legally foreclosed on a house. Robo-signers who fraudulently created mortgage documents created genuine issues as to the legality of many foreclosures, and therefore, the subsequent sales (the old adage is true–you can’t sell what you don’t own). Equally important, in my view, is whether the banks that are foreclosing on homes can legally do so because they do not actually hold the mortgage. The home loans have been pooled, sold, choppped up into pieces, and then re-sold to investors through the process called securitization. Once again, you can’t sell what you don’t own.
Personally, I would be very hesitant to purchase a house that has been foreclosed upon, no matter how good the deal. I know there are great discounts, but with the banks’ questionable lending and foreclosure practices coming into the light, I think we’re going to see more and more foreclosures voided and more attempts at foreclosure stopped by the courts.
Of course, the best solution is to keep the banks from foreclosing in the first place. If you are facing a foreclosure, or concerned about a default, the best move is to contact an attorney who can help you avoid adding one more home to the banks’ roster.