There are a number of legal aspects to purchasing property. This is even more the case when it comes to investing in pre-foreclosure and foreclosure properties. Although you certainly don’t need to be a lawyer to invest in pre-foreclosures and foreclosures, you should definitely avail yourself of the services of a qualified property lawyer. It’s also wise to be familiar with a number of the legal aspects of pre-foreclosure and foreclosure investing. Here are just some to be aware of.
1. Foreclosure proceedings
The process for initiating and carrying out foreclosure proceedings varies from state to state. It’s therefore critical that you be aware of the laws that apply in the area you are looking to invest in. Some of the differences will be around the timing and types of notice required of a bank or lender when it commences foreclosure proceedings. There are also differences around when, where and how such notices are publicly recorded, and around the time limitations applying to when a home owner can make good on their mortgage, or sell their home during pre-foreclosure.
2. Foreclosure auctions or trustee sales
Foreclosure auctions or trustee sales (depending on which applies in your state) also have specific rules about such matters as the conduct of the auction and what level of funds are required by a successful bidder. In particular, you will need to be aware of how much money you will need on the day of the auction, and how much you will need within a set period of time after the auction, in order to pay for a given property. You will also need to know what form this money may take. Finally, you will also want to know if the home owner retains “redemptive rights”. In certain states, within a specified period of time – from a few days to a year – someone who has had their home foreclosed retains the right to re-purchase the property.
3. Legal agreements
Depending on whether you buy a pre-foreclosure property, a property at a foreclosure auction or trustee sale, or a REO (real estate owned) property from a bank that has been forced to buy the property, different legal agreements will apply.
While there will be an agreement governing the sale of the property, you will have more or less flexibility in negotiating this agreement depending on how you buy it and from whom you buy it. You will generally have the most flexibility when purchasing a pre-foreclosure property. You will also need to be familiar with financing agreements if you intend to use investors’ or lenders’ money to fund the deal and other kinds of agreements if your deal structure is somewhat more “creative”. In any case, you will need a competent attorney to help draft and/or negotiate such contracts.
These are just some of the legal aspects of investing in pre-foreclosure and foreclosure properties that you’ll need to know as a property investor. Be sure to consult your attorney for more information about the laws and types of contracts you’re likely to come across. Meanwhile, for a complete system on how to invest in pre-foreclosures and foreclosures, be sure to get over to my website.