The only way to buy directly from the bank is if you are a cash investor that is purchasing in bulk, 20 to 100 or more houses at a time. Generally these types of investors are other corporations with millions of dollars in cash available.
There are many types of distressed homes. Bank owned homes are called foreclosures. These are also called REO's. To confuse you, the home may be purchased on the courthouse steps at the time the bank is scheduled to take title in an auction process, which is also called foreclosure. Then there is the pre-foreclosure, which is also know as short sale, foreclosure pending, and defautl period. The "short sale / pre-foreclosure" is the time before the owner has formally lost the house to the bank. They may still be living in it, or they may have voluntarily moved out. The bank cannot evict them until after the bak takes title to the home.
To confuse you still further some houses are offered in secondary auctions that are held after the bank has acquired title. So not all auctions are of the all cash at the courthouse steps variety.
Do you need to pay the amount owed? No. the amount owed is irrelevant to the market value. You need a real estate agent to guide you in bidding because there are hundreds of different companies representing hundreds of different banks. each house has a different set of forms called addendums that have to be interpreted for you. The most efficient "auction" for both the banks and the buyers is the MLS.
By using the MLS, you and your agent can review 99% of the properties available for purchase including bank owned at full retail prices, bank owned - priced and available for auction style bidding,
The MLS also has listings of the short sales and pre-foreclosures as well as builder close-outs, probate sales, bankruptcy sales, relocation buyouts, and even normal human being sellers that need to sell for personal reasons.
You and your agent then choose a few house to go look at that meet your wants and needs list. Then you and the agent discuss which one (s) you want to make offers on . You may be competing with other buyers.
If the home appears to be priced very low in comparison to similar homes you might be competing with many other buyers. Yes even this market. These MLS multiple offer situations are also known as "auctions" - This often results in a sale price that exceeds the list price. I can prove this.
The real estate market is very efficient for sellers, Becasue of wide exposure to most serious buyers, sellers are usually able to receive a high percentage of current market value for the houses. The key word is "current" market value. The reason why houses are such deals today is that the current market values in Sacramento are 30 to 50% below the market values of the peak of the market 3 years ago.
These properties can be listed with very aggressive prices, in some cases we are seeing multiple offers because of this. The inspection period for a buyer can be moved up from the standard 17 days in a normal transaction to 10 or even 5 days depending on the bank. In most cases the banks list these properties "as is" ..... You still have the right to your inspections but need to understand that the bank may not agree to repair anything. If a buyer can not close escrow on time there can be penalties ranging from 50.00 per day to 150.00 or more in some cases. If you are looking to purchase a bank owned home they can be a great bargin but you should work with a buyers agent who knows what to look out for and help guide you...... thank you for your question I hope this helps
Now, as for auctions - the houses sometimes go up for auction right away, or they go up for auction if they have not sold quickly when listed with an agent. At least that's what's happening here. To bid, just find out the auction house, go to their website and read CAREFULLY their criteria for bidding. And know this, you can get your real estate agent to register and represent you at auction at no cost to you in many cases. Just look for the "Registered Agents" section or something like it on the company's website. I wrote an article recently on my blog about what some of the houses were going for in our area compared to what they were listed for months ago. A good deal will range in the 30-40% off of list price. You can read about that at http://jenniferyounghomes.blogspot.com/ . Just go down about six articles to find it. Happy hunting....I hope you find a great home!
Sacramento there is such a selection of newer homes at fantastic prices. As long as the buyer has a knowledgable agent, for advise and help in the process - and if it's under $200k, you'll most likely be in multiple offer situations if it's a newer house in a subdivision. Many times the lender will already have done a termite report which can be given to buyer. Buyer has option of getting home inspection - but they need to have one lined up quickly as inspection periods are short on bank owneds.
I've seen some pretty happy first time homebuyers recently. They were all but priced out of the market
2-3 years ago.
My best advice is if you're serious about a home purchase, and you need to a mortgage, get approved now! The longer you wait, the higher scores you'll need, the higher your down payment! I can't stress this enough as I turn away most borrowers that I could have approved for a loan just months ago!!