When it’s a price from RealtyTrac.
I get LOTS of calls and emails about this and, if you visit Trulia Voices with any regularity, you’ll have seen many questions pertaining to this as well.
Bottom line: someone wants to know how they can get:
· A 1,869 sq. ft. home in San Ramon for $236,560.00. Or ...
· A Castro Valley town house for $63,560.00. Or ...
How do they EVER come up with prices like that?
After all, everyone knows that the going price for homes like these is SUBSTANTIALLY more. Hundreds of thousands more, in most cases. Because ... those prices are posted by RealtyTrac.
Did I mention that this is VERY frustrating?
Not just for me, but for the hundreds of potential home buyers who see the prices online and hope that maybe, just MAYBE they’ve finally found a bargain they can actually afford.
Time to go to school, so sharpen your pencils and hunker down for some ‘larnin.’
When homeowners can no longer make their payments, they eventually get a Notice of Default from the bank. This notice is recorded in the county’s public records. If there is more than one loan, a notice will be issued for each loan that’s in default.
Companies such as RealtyTrac go thought the county records to find Notices of Default. They compile the data and then sell it to subscribers. To get you to subscribe to their service, they post Notice of Default information on sites such as Trulia.com.
WHEN SOMETHING LOOKS TOO GOOD TO BE TRUE... (do I really need to say the rest?)
When you see data coming from companies such as RealtyTrac, it will be one of two numbers. Read the fine print VERY carefully to see which number it is:
1. A Notice of Default.
This is called a Pre-Foreclosure Notice and will be the price of ONE of the existing loans on the house. And guess what ... they won’t give you the address ‘“ they want you to subscribe. For a fee.
IT IS NOT THE PURCHASE PRICE FOR THE PROPERTY.
2. A Notice of Trustee’s Sale.
IT IS NOT THE AMOUNT FOR WHICH YOU CAN PURCHASE THE PROPERTY.
Trulia.com will post a third number - this is the Price of Completed Sale. This is usually the amount of the FIRST mortgage and is the amount the bank actually paid the trustee to buy back their own property at the Trustee’s Sale. You finally get the address - because now it’s public knowledge in the county records. And it's free! However ...
IT'S STILL NOT THE AMOUNT FOR WHICH YOU CAN PURCHASE THE PROPERTY.
Did I mention this is VERY frustrating?
The process is as follows:
1. Notice of Trustee’s Sale.
If, after receiving a Notice of Default, the owners of a property allow their home to be foreclosed, then a Notice of Trustee’s Sale gets posted by the trustee. This is usually the trustee holding the primary note. In California, it’s not the bank that forecloses, it’s the Trustee. RealtyTrac posts the amount of every loan in default.
2. Trustee’s Sale.
Once the Trustee decides to foreclose, it goes to a Trustee’s Sale. This sale is held on the courthouse steps in the applicable county. Usually, the bank buys its’ own property from the trustee for the full amount owed on the primary mortgage. In the current market, the price the bank pays to obtain the property is often more than market value. Any subsequent mortgage holders get nothing. The ‘courthouse steps’ is typically not a good place for a potential end-user to buy the property ‘“ it’s geared towards investors who buy many properties at wholesale prices. In fact, it can be a downright unfriendly environment if you don’t know how the game is played.
3. Becoming an REO.
Once the bank has purchased the home, it is now foreclosed and is called an REO (Real Estate Owned). The bank will then usually list the property at or near full market value and place it on the local MLS.
4. Finally on the Market.
At this point, it shows up on the MLS as an REO and your Realtor can show it to you. Just because the numbers posted by ReatlyTrac seem low, it does not mean the house will sell for that amount on the open market. Once the bank purchases the home at the Trustee’s Sale and it’s now an REO, the bank tries to get as much for it as possible. The price usually goes back up to at or very near market price.
When it comes to RealtyTrac, READ THE FINE PRINT!
And if you want a great deal on an REO, go find a top-notch Realtor with a lot of REO experience under their belt. They’ll show you how to get the best property at the best price and for the best terms.
And that’s really want you want, anyway.