With most foreclosed homes the opening bid at the trustees sale is the balance the homeowner owes, plus arrearages (back due payments, accrued interest and trustees fees. These all typically add up to much more than the home is worth and of course nobody will bid on those properties so the title reverts back to the bank at the trustees sale via a trustees deed. The bank is then tasked with eviction of the former owners...and/or they offer them "cash for keys" and eventually the bank takes possession of the house. Then they typically paint and carpet and list it for sale with a real estate agent who then markets it the traditional way (listed in the MLS) with all of the other homes for sale. At this point sometimes it is still referred to as a "bank owned" foreclosed home or an "REO" which is an acronym for Real Estate Owned, which is what they call the division of the bank that is in charge of selling the real estate collateral the bank ends up taking back. Sometimes instead of listing it with a real estate agent the banks utilize the services of a private auction company (auction.com, etc.) to sell the property, but then too it is usually not practical to have proper inspections of the property since most people don't want to spend $800-$1500 on home inspections, Termite inspections, and possibly well and septic inspections when they don't know if they will win the bid on the auction or not.
The numbers of distressed sales (foreclosures or short sales) has dropped substantially in recent months, and continues to decline as it appears we have worked our way through the vast majority of the distressed properties, and the recent increase in the home values over the past year has converted a lot of the previously "underwater" homeowners to equity (traditional) sellers.
Terry Bell, Realtor
CPS Real Estate
Santa Rosa, CA