Foreclosure in Cupertino>Question Details

Shokan, Home Buyer in 95054

How does one go about looking for and buying a foreclosed property. The obvious motivation is to get some discount on the price. Any tips?

Asked by Shokan, 95054 Thu Sep 29, 2011

Help the community by answering this question:


Basically a short sale is when the home owner owes more on the home than what he can sell it for. Example: He has loans on the property for 550k and the market value for his home is 450k, then for what ever reason he lost his job, there is a death in the family, he needs to transfer out of the area for work, etc: he HAS to sell his home. Well the bank is going to take a LOSS on the loans for the property so they need to approve the price and offer that the seller gets on the home as they are the ones who are going to take the loss. This process takes any where from 6 weeks to 6 months or longer to get a final approval on the price and there is usually a second loan on that property and it usually takes some time to get them to sign off as they usually take the biggest loss. It is a lot more involved than that, but that is the basics of a short sale. Now a foreclosed home also know as an REO is when the owner stops his payment on the home to the loan/loans there is a Notice of default filed and foreclosure procedures begin. ( at this point the owner trys for a loan mod., or a short sale). If no loan mod. or short sale gets done, then the bank forecloses on the property and now OWN the home. They then put it on the market or auction it off. From the buyers side this is faster as when you get your offer accepted you can close escrow in 30 days or less.
Now I just gave you the basics of the differences, they are a lot more involved than that, and as I have said earlier you need to have a GOOD buyers agent on your side to point out the possible pit falls of each.
Now I really don't want to type how many pros/cons for each one, but basically the pros for both a short sale and an REO are the same GREAT PRICE. The cons for a short sale are that the bank may counter you with a higher price, the second loan may want additional money from you to approve the short sale, the bank may foreclose on the home before you can close the short sale as it takes a long time to do a short sale, to name a few.
The cons for an REO is that the bank has there own contract to go along with the offer you send in, this favors the bank and NOT you. There is minimal disclosures on an REO so you getting inspections done right away is important, also note that this is an as-is contract and the bank will not negotiate for repairs, you have to insure that your loan goes through on time as there is usually a penalty for not closing on time it can be $50-$150 per day until it closes.
I hope this helps, I wrote a blog here on trulia a year or so back explaining the " differences between REO'S and Short Sale and how to handle each" it will give you more details.
At your service,
DRE# 01397256
1 vote Thank Flag Link Sat Oct 1, 2011
There are many bank owned properties on the MLS that have already been foreclosed. If you are paying cash, your negotiating power is great. Financing is okay too, however, FHA low down payment loans are hard to get on many REO's due to the property condition. If you would like me to send you some bank owned listings, please contact me through my Trulia profile. Kind regards.
1 vote Thank Flag Link Fri Sep 30, 2011
I also think you should get with a buyers agent and go over what you need and want. Then have your agent set up a search for you with your criteria and price so you can monitor the market so you will know when there is a good deal to be purchased. In the mean time you should be searching for a lender and get a pre approval letter so you are ready to go when you see a home you want. I see that you are a home buyer for 95054, well you are going to have a lot of competition buying in Cupertino at a discount price, as there are MANY buyers for this area looking for a " Deal" and that equals multiple offers and a higher price. I have worked mainly as a buyers agent and I am very familiar with foreclosed home purchases, so based on my experiences you REALLY need a good buyers agent to help you to navigate through the finding and purchasing of a foreclosed property. There are many things to look out for and a good buyers agent can and will point them out to you.
As always feel free to contact me with any questions.
At your service,
DRE# 01397256
1 vote Thank Flag Link Fri Sep 30, 2011
The key here is discount price.
The question here is, "On a foreclosed property?"

It may be helpful to understand how a bank determines the listed price of a foreclosed property.
it would also be helpful to understand what 'discount' means in your world. Some bargain seekers think 50% of listed price is a discount. This however, is an unlikely formula for success.

Finally, understanding how the bank adjusts the list price until they get the multiple offer they want is very important. Why? In most cases, the house you waited 8 weeks to buy will be purchased by someone else for $7,000 more that you were willing to pay. This movie and all its sequels have the same ending...a gigantic waste of time for everyone.

Tips: work with a pro and keep your commitments.
1 vote Thank Flag Link Fri Sep 30, 2011
Hi Shokan

There are 2 approaches, one on the Court steps in down town San and the other on the MLS.
However, there are not too many REOs available with top schools in Cupertino. Some Short Sales
are available.

REOs are already bank owned, Short Sales are properties still owned by Owners who are likely not making their payments. REOs can close in 30 - 45 days, like a normal sale. Short Sales can take 3-6 months as
Bank/s/ have to assign an Asset manager or two, also based on number of lien holders, banks have to agree on the split of the proceeds.

One can get a good deal with both a Short Sale or a Bank Owned property, the key is to get an excellent negotiator on your side.

Best regards
P Mistry
0 votes Thank Flag Link Tue Oct 11, 2011
Thanks guys for all the useful feedback. One basic question: What is the difference between short-sale and a foreclosure? What are the pro/cons of a short sale vs foreclosure?
0 votes Thank Flag Link Fri Sep 30, 2011
There are two ways to get a "deal" on a foreclosure.

1: Buy the home on the courthouse steps. Very very risky. Basically a blind purchase in some cases.

2: Buy with all cash. This reduces risk to the lender selling the home so there is value there for them. you should expect to save between 10 and 15 percent depending on the market you are in.

With rates so low. Make sure that the discount is worth the opportunity loss. You may be able to buy two homes if you use the money wisely and rent one home. Of course there are other investments also. They all have their own risk/reward so do your homework and use a professional.

Best Regards,

Eric Soderlund
0 votes Thank Flag Link Thu Sep 29, 2011
Trang has offered great advice. Find an agent and skip headache and steps to a quicker close, which usually equates to lower purchase price.
0 votes Thank Flag Link Thu Sep 29, 2011
You should contact a local real estate agent to help you. Explain to the agent what you are looking for (i.e., foreclosed properties). Most agents should have access to the foreclosed properties and should be able to separate those out for you (from the regular sales). You may consider short-sales also if you are not in a hurry to buy since those can take up to a year to close. Your agent should be able to advise you on the best type of properties to look for based on your requirements. Good luck!

Trang Beuschlein
San Jose CA Real Estate
CA DRE License #01453711
0 votes Thank Flag Link Thu Sep 29, 2011
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