Foreclosed homes in Texas can provide plenty of opportunities for would-be homeowners or investors to save money on discounted properties. But if you go into purchasing foreclosed homes blindly, you may be getting in over your head.
While Texas is ranked 19th in the nation for foreclosure rate, there are also simply more properties in The Lone Star State when compared to most of the U.S. So opportunity is there, but understand that the process and circumstances surrounding foreclosures are different than traditional homes.
Below, we’re looking at what you’ll need to purchase a foreclosure, the pros and cons of such sales, the resources available, where to find properties in the process, and how to save on home insurance in Texas once you close the deal.
How To Buy Foreclosed Homes in Texas
Understanding how to buy foreclosed homes in Texas is key to your success, but will only truly come through experience. Foreclosed homes in Texas have different circumstances surrounding them than conventional homes including how you submit an offer, the process, and the speed of transactions.
If you are not well-versed in how to purchase homes ongoing a foreclosure, using a trusted real estate agent can’t be mentioned enough. These experts can provide you with expert advice, keep your affairs in order, and assist in many different ways.
Nevertheless, if you’re looking to dip your toes in the water, here are some great tips for buying foreclosed homes in Texas every prospective buyer should know:
Do Your Research
To get started with buying foreclosed homes, consider pre-foreclosures or REOs which allow for traditional funding and due diligence. Competition is fierce for foreclosures but finding the right property can be as easy as a click away. Several popular real estate apps, many likely already on your smartphone, offer easy-to-use search tools that allow you to filter for foreclosures.
You’re also going to want to do research on your local market. Real estate is complex and deals with many factors. You’ll want to be sure that not only are you getting a good deal from the foreclosure sale but that you’ll have the opportunity to get a return on your investment after purchasing, regardless of the avenue you take.
Securing funding to purchase a foreclosed home is a critical step, but how you go about it will depend on the type of foreclosure you are dealing with. For example, auctions often require cash deals while pre-foreclosures and REOs are more open to the use of traditional home loans.
To make an offer on a property, you will need a pre-approval letter from a lender to show you have financing. This is how you’ll be able to prove your financial strength as a potential buyer.
Additionally, Texas also offers programs for first-time home buyers, which can provide down payment assistance. Since foreclosures often need repairs, you can also consider loans specifically created to help overcome these costs.
Speaking of repairs, it’s not uncommon for foreclosed homes to be flip projects for investors looking to make a return on their investment. If this is you, realize the risks involved and be sure to factor in how much you’ll have to spend on repairs and sell for to recuperate your expenses and turn a profit.
Work With Realtors
Working with a real estate agent has many different positive benefits and these are only amplified when purchasing a home through foreclosure. Not only can Realtors help you find suitable properties going through foreclosure sales, but they will be an expert guide for you every step of the way. This is important because complex foreclosures can bring out weird scenarios that are difficult to overcome alone.
Conduct as Much Due Diligence as Possible
Due diligence is necessary when purchasing any property but with foreclosures, things are not as clear as they ordinarily are. This is because of the circumstances in which foreclosure sales occur.
You’re going to need to see if there are liens against the home and conduct a title search to ensure the property is actually yours. An inspection is also important to understand the condition of the home you are purchasing. Yet, there are obstacles.
Lending institutions and banks are looking to cut their losses with the previous owner and get their affairs in order as soon as possible. To do this they are going to need to also sell the property as soon as possible. In other words, things are going to move quickly.
If the foreclosure is an auction, viewing the property or conducting an inspection isn’t usually going to happen. This means doing your own research on similar properties in the area, conducting a title search, and hoping for the best.
Pre-foreclosures or REOs are more friendly towards the idea of getting a tour before making your offer. You’re also more likely to have the ability to get an inspection during these types of sales.
Submit an Offer and Complete the Closing Process
Once you’ve found your property, a real estate agent to work with, funding, and conducted the right research, it’s time to formally submit your offer. For auctions, a cashier’s check is typically necessary to put as a down payment. Afterward, you’ll receive how to pay the rest by the specified deadline once it’s sold to acquire the property deed. This is usually within a month.
Pre-foreclosures and REOs follow a similar process to purchasing conventional homes. But things can come up. This is why while you’ll have a title company to tell you the necessary things you’ll need to produce, having a real estate agent can help you stay prepared ahead of time.
How To Find Foreclosed Homes in Texas
Finding foreclosed homes in Texas can be challenging depending on your market. If you are in a city with a smaller population and fewer homes, for example, you can expect fewer foreclosures than larger metro areas. But thankfully, resources are available:
- Be sure to check online for foreclosures in your desired area. There are websites and popular real estate apps such as Realtor.com, Zillow, and Trulia are great starts.
- A specific mention for HAR.com should be mentioned, as it is directly tied to a majority of Texas properties. MLS.com is a nationally recognized source of all things real estate that is also a great resource.
- You can also search lending institutions as well as local publications, both in real life and online, for potential homes heading to foreclosure.
- Real estate agents are also great resources for finding foreclosures in Texas.
The foreclosure process in Texas is laid out under three different types:
- Judicial foreclosures are when a lienholder files a civil suit against the homeowner and is allowed to sell the property only after a court rules in their favor. Of all types of foreclosure, this is the least common in The Lone Star State.
- Non-judicial foreclosures are when lienholders don’t file a lawsuit against the homeowner and can sell the home. Also known as a power of sale foreclosure, they are allowable under Section 51.002 of the Texas Property Code and the terms and conditions of various contracts.
- Expedited foreclosures can be allowed for lienholders applying under Rules 735 and 736 of the Texas Rules of Civil Procedure allowing non-judicial foreclosures under certain circumstances that may otherwise require a judicial foreclosure.
No matter which type of foreclosure you are pursuing, you’ll still want to apply the same precautions and take into consideration the same types of risks mentioned above.
Pros and Cons of Buying Foreclosed Homes in Texas
Buying foreclosed homes in Texas can be a good deal for buyers, as they are often priced lower than market value, and the closing process can be quicker. However, buyers should also consider potential hidden costs and repair issues.
Many foreclosed homes are typically sold “as is,” meaning there could be expensive repairs around the corner. Considering inspections aren’t always available, this could be detrimental to your finances as a homeowner or investor. Liens or other financial obligations may also become your responsibility after purchase.
The foreclosure process is also often more complicated than a typical home sale, as foreclosed homes may be sold through auction or with the seller’s agent.
Ultimately, the decision to purchase a foreclosed home in Texas depends on the buyer’s budget, comfort level with risk, willingness to conduct due diligence, and willingness to take on repairs or renovations, among other responsibilities, as they arise.
How To Evict Someone From a Foreclosed Home in Texas
In the event that you’re purchasing a home but the person living inside won’t exit the property, eviction may become necessary. This can be an uncertain, complex, and uncomfortable process, but necessary to gain access to the property you now own.
However, the process may not be straightforward, but there are guidelines and systems in place. The eviction process in Texas is also another area in which working with a real estate agent can help you, especially if dealing with multiple properties is in your future.
In Texas, when a homeowner defaults on their mortgage, the foreclosure process begins. The lender sends a “notice to cure” giving the homeowner 20 days to bring the loan current. If not cured, a “notice of acceleration” is sent, starting the foreclosure process. To stop the foreclosure, the homeowner can file for bankruptcy or pay the full mortgage amount plus fees and interest before the sale date.
You can find foreclosure sales on the first Tuesday of each month after the 21-day acceleration period. The sale is cash-only with a lender-set minimum price. If the bid doesn’t meet the minimum, the lender keeps the property and may recover the remaining mortgage balance. The borrower cannot buy back the property and may face eviction by the new owner if still living there.
You’ll need to go to the county constable’s office where the property is served eviction notices with a court date for a hearing. After the judge’s ruling, the former homeowner has five days to move out or appeal. If they’re still living there after five days, the constable posts a 24-hour notice before physically removing the occupants and their belongings. The entire process can take under 60 days from the first notice filing.
Before you go through with an eviction, it’s always a good idea to refresh your memory on the tenant law in Texas. Doing so will help you avoid making mistakes and breaking the law while taking the appropriate steps to access your new home.
How To Save on Insurance After Buying a Foreclosed Home in Texas
Even if you’re only purchasing a home to flip it, you’ll need to protect your property. While you won’t have to worry about being forced to have coverage in some cases, you’ll still need to hedge against the risk of suffering a major loss.
Freedom Insurance Group helps homeowners throughout Texas save an average of 40% on home insurance, which means more money in your pocket. Here’s how we do it:
- Insurance companies are all looking at how much risk you possess, which will factor into how much you pay in premiums.
- But each company assesses risk factors differently, meaning you’ll receive different prices even for the same coverage.
- Comparing your coverage needs allows you to find the most affordable option and save money while remaining protected.
- We work with more than 25 top-rated insurance companies and find the lowest price among reputable carriers to deliver the right coverage for less.
Foreclosed homes in Texas still need protection but you shouldn’t overpay. Contact us today for home insurance coverage or get a homeowners insurance quote online. If you plan on renting out your new purchase you can also purchase a Texas Landlord Insurance Policy.