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Buying real-estate owned homes presents challenges

Foreclosure is a topic we have covered regularly on this blog. South Carolina -- and the rest of the country -- has seen a large uptick in the number of foreclosures and home repossessions since the recession began in 2008. As such, many readers might be wondering what happens to a home after a mortgage lender repossesses it?

In most cases, the lender -- whether it is a public or private agency -- will look to sell the home in order to recoup some losses. Once a home is repossessed, the house is generally considered a real estate-owned property and is auctioned off. In many cases, the homes may be available for purchase at a relatively low rate, which can be a great opportunity for buyers. However, buyers may run into some hurdles if they don't take the right precautions.

When a property is foreclosed, it may take the mortgage lender a while to sell it. During this time, the property may not be maintained, which can lead to a number of issues. If potential buyers aren't made aware of any repairs that need to be made, they may unexpectedly be on the hook for a variety of unexpected expenses.

Beyond concerns about the physical state of a real estate-owned property, there may also be unique aspects of purchasing a home from a lender. Because the terms of sale might be different than a traditional residential real estate transaction, it may be helpful to seek the counsel of an attorney who understands how to work through the process.

As the number of foreclosures has increased, mortgage lenders have shown a greater willingness to renegotiate mortgages or agree to short sales, which prevents the foreclosure process from moving forward. As a result, the number of real estate-owned properties on the market could decrease in the near future. Regardless, it's still important to understand all the terms of a real estate transaction before putting the pen to paper.

Source: AOL Real Estate, "What Is an REO?" Diana Olick, March 15, 2013

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