Russellcv, Home Buyer in Central Richmond, San...

Hpw do you purchase a home in fore closure?

Asked by Russellcv, Central Richmond, San Francisco, CA Sun Jan 24, 2010

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Jeff Woo’s answer
If by "in foreclosure" you mean that a Notice of Foreclosure or Notice of Sale was recorded, but not completed, then there is a process to seek to buy the property. A date for an auction will be set and the auction will usually occur at City Hall or the Court House (the Notice of Sale will state whereand when).

At the auction, the lender will bid an amount equal to the loan in default. You will have an opportunity to bid as well. While the prices of property at foreclosure auctions are very low, there is substantial risk that must be considered, including (1) you will have NO information or disclosures about the property; (2) you will not have the opportunity to inspect the property prior to purchasing; and (3) you will have to deal with any occupants in the property, including tenants or the defaulting borrowers.

The above assumes that the foreclosure is "non-judicial". If the foreclosure is "judicial" meaning that the lender filed a lawsuit against the borrower to foreclose the property, the borrower as a one year right of redemption. That means the borrower can continue to live in the property and seek to payoff the loan for the one year period.

Of course, before the property goes to auction, there is the opportunity to attempt to purchase the property directly from the borrower. These are often "short sales" in which the sales price will not cover the amount of the mortgage. Short sales require the cooperation and agreement of the lender, and have many challenges.

If the lender does foreclose and is the winning bidder at the auction, it will not doubt market the property for sale eventually. That property is known as an REO and Jed's advice is relevant.

Jeff Woo, Esq.
Sedgwick, Detert, Moran & Arnold LLP
Complex Rental Property Group
1 vote Thank Flag Link Sun Jan 24, 2010
The process is different than a normal purchase in that you need to do more investigation before the offer goes in. Once offers have been received you will be coutered to give your highest and best offer. Every person that offers on a bank owned property seems to be asked this. The bank wants as much money and as few contingencies as possible. The bank will chose the highest offfer with the fewest chances of falling out.
The banks also don't feel that state law applies to them so be sure that you can force the neccesary seller mandated actions out of them or be prepared to pay for them youself. The agents representing banks run the gamut from arrogant and un-involved to very good and efficient.
Be sure you work with an agent that is there to protect you and make your vision happen.
1 vote Thank Flag Link Sun Jan 24, 2010
Jed Lane, Real Estate Pro in San Francisco, CA
If you mean by at auction, you will need cash. You can check the online auction sites to see when sales will take place.
0 votes Thank Flag Link Tue May 26, 2015
Some people get Foreclosed, Preforeclosed, Short Sale confused. Either case contact your local Realtor to help you purchase your home.

Good Luck,
William Squires
0 votes Thank Flag Link Mon Jan 25, 2010

As the others have stated, there are different kinds of foreclosure properties - those that have already been foreclosed and those that are in process. If you buy at auction you have to put up a cashier's check "on the courthouse steps" as David mentioned.

If it's already been foreclosed (REO) and offered through the MLS the offer process is close to the same as a regular sale, although you won't get as much disclosure information as you would in a "normal" sale. Although foreclosed properties are usually sold "AS-IS," you do have the right to inspections, which will allow you the ability to determine the condition of the property prior to purchase. Keep in mind that sometimes buyers will make offers with no inspection contingencies, and unless you really know what you're doing this is a VERY bad idea. If someone else wants the property that bad, go on to the next one.

Last, as the others have suggested, get a knowledgeable broker to help you. Too much money on the line to do otherwise.

Best Regards,

Lance King/Managing Broker
0 votes Thank Flag Link Mon Jan 25, 2010
If you are asking how to buy a home that is foreclosing, then you need to pay cash on the court house steps. Buyer beware. If you do not know what you are doing, you better find someone who does or you can get burned.

If you want to purchase a home after it has foreclosed, then that's a bank owned property (REO) which is much safer because you have plenty of time to do your due deligence including getting inspections.

Now, to answer your question about how you purchase a REO, you should work with a local agent who is knowledgeable about the area and who you trust. Ask a friend or co-worker to refer you to someone. Another way is to find an agent on Trulia.

Good luck, and also make sure to get pre-approved for a loan if you are going to finance your home.

Cashin Company
0 votes Thank Flag Link Sun Jan 24, 2010
Homes in foreclosure are often owned by the bank or an intermediate. You can purchase it the same way you buy a home from a seller. Collect your down payment, get pre-approved and find an full time agent who works the market your are interested in so you have an expert on your side when you make an offer.

Be prepared for a time line with no measure. I've had bank-owned properties which close within a few months, and I just encouraged a buyer walk away from from a negotiated short sale which we agreed to the terms in July 09.

Buyer beware is the best advice in a short sale/foreclosure purchase. I encourage my clients to do dual duty if they want to go forward with a short sale. Most often we continue searching for a "regular sale" and whatever happens first, so be it.
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0 votes Thank Flag Link Sun Jan 24, 2010
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