Foreclosure in Philadelphia>Question Details

Carrie, Both Buyer and Seller in Philadelphia, PA

Can someone please explain to me what the difference between a foreclosure is and a home going to auction?

Asked by Carrie, Philadelphia, PA Tue Nov 25, 2008

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Are you looking to purchase or make an investment in a distressed property ?

Many investors will look for foreclosed properties, REO and bank owned properties, HUD properties, short sales. Other options will include auctions, estate sales or just a seller in durress.

Some of the investor oriented properties we are marketing are on .

Also, we just listed a short sale property yesterday in Old City right on the river.
0 votes Thank Flag Link Wed Nov 26, 2008
Hello Carrie,
So, foreclosures are made up of several stages and Pennsylvania is a judicial state so all matters in this regard are handled by the courts. Phase 1 known as pre-foreclosure consist of a period where the borrower has missed at least 2 payments. At this point the lender makes contact with the borrower attempting to address this issue. If the homeowner is unable to bring the loan current several options may be presented to resolve this issue. 1) the homeowner can provide a Deed in Lieu of Foreclosure (returning the property to satisfy the debt) 2) The homeowner places their home on the market as a FSBO (4salebyowner) or with a licensed Realtor. The hope is to get an asking price above the debt on the property. If they fail to do this the bank may accept what's known as a short sale (accept an offer that is less than what is owed). A useful option but it can be rather difficult to navigate and may stretch over several months.
Now, if none of the above occurs it will move on to the third phase. Here the legal aspect have taken there course and the owner has been requested by the sheriffs office to vacate the premises. The sheriff then makes the sale know to the public (local papers and the monthly sheriff mag). If you choose this route to obtain a foreclosure be ready to bid with the sharks, have at least 10%, and you normally won't be able to view the interior of the property prior to the sale. Finally, Phase 3 occurs only if the property is not sold at the public auction. Here the lender will seek the services of a local Realtor to list the property to be sold on the open market. All phases of the process presents an opportunity to save money if you looking to purchase. Personally, I prefer pre-foreclosure because their more room for negotiate and the bank hasn't incurred further holding expenses and attorney fees. Honestly, this is also a good phase to resolve any issues of defaults too! Here's a word of warning for sellers considering a short sale. Be sure your lender provides you with documentation verifying that you have been released from you "entire" debt. Otherwise they may seek a judgement to obtain that outstanding difference.
In conclusion, a foreclosure is the judicial process for a lender to acquire a property to satisfy a debt of a borrower and the auction is a process used by the system to liquidate that asset.
Hopefully this answer is helpful. If I could be of any service to you or you just have more questions feel free to contact me. I am a specialist in this area of the market and deal with these situations regularly.

Need Realtors
To Help With BPO's & Foreclosures
0 votes Thank Flag Link Tue Nov 25, 2008
Foreclosure: the owner of the real property has defaulted on the mortgage. The mortgage lender takes possession of the property in lieu of payment.

Auction: an event at which property is sold. Real property may be sold at auction. A seller may elect to sell real property at auction for a variety of reasons. Auction may eliminate the suspense of offeriing the property for sale by more traditional means. The property does not need to be distressed in any way to be sold by auction. It is just one means of selling property, real or otherwise. The auction is set for a particular time and date so that anyone who is interested has the opportunity to register for the auction. Once registered, anyone may bid according to the auction rules.

Auction rules will explain how the bidding will be conducted, when and if you are allowed to examine the property, how payment will be accepted, when payment will be due, if there is a reserve price, and other assundry data. When bidding at auction, you are still entitled to representation by your own Buyer's Agent. Before the auction, you will want to check the tax records, run a title check, have the property inspected, determine if the law in your state allows for the owner to reclaim the property within a specific time period, and estimate your expenses for any repairs that may be needed (if any).

Ask your agent to run a comparable market analysis for the property to determine its fair market value. Set a price in your mind before you enter the bidding. Do not go above your set price. This is hard. Especially when the bidding takes place in person and everyone gets caught up in the momentum of bidding. People like to win; it's in our nature. Have your agent remind you of the price you set as your limit if needed.

If you do end up going to an auction, have fun!
Web Reference:
0 votes Thank Flag Link Tue Nov 25, 2008
With a foreclosure, the lender has taken posession of the property and is selling it.

There are differnet types of auctions...but the one I suspect you are inquiring about is when, after a period of time, a lender is unable to sell the home through a real estate agent, they give the auction to an auction company to sell.
Web Reference:
0 votes Thank Flag Link Tue Nov 25, 2008
The Hagley G…, Real Estate Pro in Pleasanton, CA
It may be non. Foreclosure is the process of reclaiming a piece of property which the lendee has defaulted on the loan. An auction is just a method of selling a property to acquire funds. For instance, if you wish to sell your home, you could use a real estate agent or an auctioneer. With an agent, you are more in control of the what to accept as a selling price. In an auction, there are only guidlines given to the auctioneer. Foreclosures COULD be sold in an auction or through a Realtor.

Hope that helps.

Terrence Charest
0 votes Thank Flag Link Tue Nov 25, 2008
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