The state of Massachusetts has become increasingly popular with real estate investors in recent years. The median home value in the Bay State is approximately $433,000 and it has also shown great promise for property flippers seeking to make quick profits.
But the real question is how to buy foreclosures in Massachusetts. In this post, we will outline the basics of foreclosures in MA, unpack why these properties tend to sell below market value and provide some suggestions for where you can actually find these properties.
The Basics of Foreclosures In Massachusetts
A foreclosed property has gone through a process where the lending institution has tried to recover some of the outstanding funds from the property owner who has defaulted on their loan. The lender will then usually sell the property at a foreclosure auction for a lower price than it is worth, to get it off their books as soon as possible.
Under federal law, the loan provider normally has to wait 120 days (or more) before officially initiating a foreclosure. This gives the property owner sufficient time to explore alternative options before they essentially give up the ownership rights of the property.
For real estate investors, foreclosures often present good investment potential, because these properties are often sold below their market value. This is mainly because lenders are not in the business of property management and would rather sell a property that has been defaulted on, in order to avoid paying ongoing maintenance expenses.
In the state of Massachusetts, lenders and banks need to file lawsuits in order to proceed with the foreclosure process. While much of the buying process for a foreclosed home is the same as any other property purchase, property investors may find the purchase process to be more nuanced in certain ways.
The Foreclosure Auction
Foreclosure auctions often take place in courthouses, county clerk offices, and even the property being auctioned. The main gamble for investors is that they are not always allowed to inspect the property before it is auctioned and must take the property at face value.
It’s also important to note that as the buyer of a foreclosed home, you can be liable for outstanding expenses like property taxes, so it is important to research the state of the title prior to the auction.
The lower costs associated with foreclosure auctions attract many property investors looking for a cheaper property they can rehab and flip for a better profit so competition will be high. Nowadays, online foreclosure auctions are becoming increasingly popular as a new way of purchasing but can be even more competitive.
A pre-foreclosure is an earlier stage of the foreclosure process. Pre-foreclosures start when the lender files a default notice on the property, informing the owner that foreclosure will be pursued if they cannot repay their debt.
The length of the foreclosure process will vary depending on location. In Massachusetts specifically, pre-foreclosure can only be initiated when the property owner is 4 months behind on their loan repayments.
At this point, there is still an opportunity for the property owner to pay off their debt and reverse the pre-foreclosure status. If they cannot make the repayment however, the property will be sold. A pre-foreclosure home that goes up for sale is another outcome, also known as a short sale.
Where To Buy Foreclosed Properties In Massachusetts
There are a number of online options available to you. The following three websites are a great place to start:
Then you can also find plenty of additional opportunities by:
Additional Tips for Property Investors
The rest of the process is much the same as with other property purchases, and you will need to present an offer to purchase. If you are buying a foreclosed property, you should check that everything has been done in line with the law and a certificate of title has been issued.
Your offer will be taken more seriously if you can provide a proof of funds letter – this sets you apart from other buyers. This is because if foreclosures are popular in your area with other investors, the chances are that you will have to compete and a proof of funds letter adds gravitas to your offer.
If you are planning to bid, decide how much you are willing to do in advance. Be prepared to bid and exceed other offers in set increments until you reach the limit you set for bidding.
Buying a foreclosed property can be a good avenue to finding more affordable homes in Massachusetts. Investors can expect to find properties for better prices at these auctions, but with the caveat of not always being able to inspect them first.
If you are prepared to take that risk, you should go into the auction with a plan and a maximum bid limit. By doing so, you could open the door for a profitable flip or a rental acquisition that generates passive income for decades to come.