What Do I Need to Know About Buying a Foreclosure in Alabama?

You can get a great buy on a foreclosed property but there are some unique challenges you should consider:

We have had many successful transactions with foreclosures! Partnering with a knowledgable real estate team will go a long way toward helping your puchase of a foreclosure go smoothly.  Our services won’t cost you anything (seller pays our fee) so don’t go it alone – contact the Ramey Team!

Timing
Since foreclosed properties often are priced well and are considered “good buys” they usually sell quickly.  If you are interested in pursuing short sales or foreclosures, be sure you are ready to act quickly.  Get your financing lined up, do your research, consult with your Realtor, and keep in mind that most foreclosures won’t consider a contingency.  So if you have a house to sell before you can buy, a foreclosure might not work for you.  There may be delays (see Delays and Paperwork below) so if you need to be settled in your new home by a hard and fast date, you might want to forego the foreclosures.  Each situation is different so check with the Ramey Team for timing issues related to your specific situation and the foreclosed property which interest you – and we will try to work it out!

We can help you be the first to know when distressed properties hit our market, too!

 

Funding
Sometimes you can finance a foreclosure purchase with a mortgage and sometimes you have to have cash.  We have many local lenders who will finance a foreclosure for you but there are some out of state lenders who will not.  You’ll want to check with your lender to be sure they finance foreclosures before you make an offer on one.  Most sellers will require that you provide a pre-approval letter with any offer you submit on a foreclosure, too.

Cash buyers sometimes do have an advantage.  In competative bidding, a cash offer usually is viewed more favorably by the seller because it usually means a quicker sale with fewer complications.  Some auction sales require cash.  “According to the National Association of Realtors, 29 percent of all previously owned homes sold in February were either foreclosures or short sales, mostly the former. Nearly one-third of all home sales were cash, suggesting that a big chunk of the market is getting snapped up by investors.”  Read more: at NASDAQ community

FHA/VA optins – Yes, you can finance a foreclosure with an FHA or VA loan.  Just be sure you choose a property that is in good condition!  Since some foreclosures are in rough shape, condition may preclude FHA/VA funding.  There may be some cases where the seller will make repairs or your lender will allow you to include what you need to fix up the property in your mortgage.  We can help you navigate your way through these situations.

Some Fannie Mae-owned properties offer HomePath financing.  These can be especially good buys because mortgages funded through the HomePath program have low downpayments, no mortgage insurance, and offer options for both owner-occupants and investors.  For a list of local lenders who participate in this program and to find out which properties qualify, just contact the Ramey Team!

 

Repairs
Most foreclosures as sold as is and their sellers are not willing to do repairs.  Of course, we can always ask!  Keep this in mind and evaluate the cost of needed repairs as you calculate your offer on a foreclosed property.

For some forclosed properties there may be special financing options which allow you to include the repairs or rehab work necessary with your mortgage.  Contact the Ramey Team to learn more about these foreclosure financing opportunities.

 

Delays and Paperwork
Things have improved and there are hopeful signs that this process will see even more streamlining in the coming months but make no mistake, buying a foreclosure isn’t for the faint of heart!  You can expect delays – in response to your offer/counteroffer and other decision making and even delays in closing.  You can expect additional paperwork as well.  Most lenders are dealing with a large volume of foreclosures and the process is complicated and constantly in flex.  We can help you navigate the process and help you understand what to expect along the way.

 

Right of Redemption
There is a statory one year right of redemption in the state of Alabama.  This means the owner who lost the property in foreclosure has 180 days following the date of the foreclosure to reclaim the property.  This is very, very unlikely but it is something you should be aware of if you are comtemplating the purchase of a foreclosure.  For a former owner to reclaim a property, they would have to pay all of the defaulted amounts, costs and fees. These include the purchase price paid at the foreclosure sale plus interest, necessary permanent improvements made, taxes and insurance paid, and other costs and fees.  It’s hard to imagine if the former owner won the lottery or had some other reversal of fortune that they would return to a house they lost in foreclosure rather than moving on to bigger and better things. Nonetheless, there are a couple of things you should do when buying a foreclosure:

  • Find out when the right of redemption expires.
  • Keep good records during the redemtion period of any necessary improvement you make.
  • Make only necessary improvements – save the upgrades and additions for after the redemption period expires.
  • Consult your real estate attorney with questions or concerns.

For more detailed information, see “The Right of Remption in Alabama”

How to Find the Deals
Contact the Ramey Team and let us help you!  We can send you an email alert each time a new foreclosure is listed in our market or send you weekly alerts.  We can even customize that search for you.  Just let us know how we can help you.

 

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What is a Homestead Exemption?


A Homestead Exemption is a statue which allows for a reduction in property taxes.  Homeowners in the state of Alabama may be able to claim a Homestead Exemption on their primary residence.

This exemption will reduce the taxes on that property by a considerable about – in most cases, by about half!  

 

When to claim it:
Between October 1 and December 31 of the year purchased.
Don’t miss the December 31 deadline. If you do, you’ll have to wait until the next year to claim the exemption and will have to pay that higher tax rate all year.

How to claim it:
Bring your deed or proof of ownership to the Lee Co. Office of the Revenue Commissioner to claim your Homestead Exemption.  There are three locations:

Lee County Courthouse, 215 S. 9th St.,  Opelika AL – in historical downtown Opelika
Auburn Annex, 1266 Mall Parkway, Auburn AL – located behind the Village Mall
Smith’s Station Annex, 2336 Lee Rd. 430 Suite 120, Smiths Station AL

Who can claim it:
You can claim a Homestead Exemption on your primary residence located in the state of Alabama.

  • You can only have one Homestead Exemption.
  • You have to live there – with no renters in the house.
  • You must live in the house on Oct. 1st of the year claimed.

See a chart of exemptions


Helpful Links

Lee County ALTax Records Online

Lee County Tax Assessors Office

If you have any questions about filing your Homestead Exemption, just get in touch with The Ramey Team – Cathy 334-703-8960 or Jack 334-703-3985!

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