Buying a foreclosure in Ohio differs somewhat from buying other homes in Ohio. First, there are different pros and cons of buying a foreclosure, and there are different stages of a foreclosure at which you can buy the home. The first stage is a pre-foreclosure, the second stage is a sheriff’s auction, and the final stage is repossession, or REO (real estate owned). You can buy the home at any one of these three stages, but Rick Sharga, of RealtyTrac, says, “the safest and best way to buy is when it’s a bank-owned property”. Here is more information on the stages of foreclosure, and how to buy a foreclosure.
Pre-foreclosure homes are homes that are in the foreclosure process, but haven’t been sent to auction yet. Homes in this stage are being sold by the homeowner, typically because the owner owes more money on the home than it is worth, and cannot or will not continue making the mortgage payments. Potential buyers wishing to buy a pre-foreclosure need to speak with the lender and the owner to negotiate an offer. Buying a pre-foreclosure home is a slow, complicated process that will require patience from the buyer. Generally, homes at this stage are more expensive than homes at the sheriff auction and REO stage.
Sheriff’s auction homes typically sell for the lowest prices. This is because these homes are often fraught with difficulties, and will require a lot of work from the buyer. At this stage, it is very difficult for potential buyers to get a home inspection, meaning that buyers won’t be aware of all of the issues a home has before purchasing it. Homes at the sheriff’s auction stage usually come with a long list of expensive and time-consuming repairs needed, which counteracts the low sale price.
REO homes are bank-owned properties that failed to sell in a sheriff’s auction. It is easier for potential buyers to commission a home inspection on these homes before purchasing, which eliminates the chance of getting stuck with unanticipated costly repairs. REO homes are almost always sold “as is”, meaning the bank won’t make any cosmetic repairs, and will only sometimes pay for repairs that are necessary to preserve the health and safety of the buyer. Buying an REO home is generally a much quicker-moving process than buying a pre-foreclosure home, so it is important for the buyer to get pre-approved for a home loan and have a home inspection done before making an offer.
When choosing to buy a foreclosure, it’s important to make sure you are financially and mentally prepared for the sale…
-You have enough money to buy the home, pay closing costs, pay taxes, and make necessary repairs/ you have been approved for a home loan
-You know what comparable homes in the area sell for, and are not likely to overpay for the property
Another tip: Don’t buy a foreclosure in an area with a lot of foreclosures-property values in the area are very low and unlikely to rise in the near future.