Erica Jones Starkey
JSCA Real Estate Group
Providing Superior Solutions for Your Individual Real Estate Needs
An auction reserve is an undisclosed amount the seller is willing to let the home go for. If the bid price does not reach the reserve, the seller is not obliged to accept the highest offer. (like on EBAY)
Here is an anecdote at an undisclosed location in Walnut Creek.
There is a for sale by owner property (FSBO) and the sellers name, will be hypothetically "DONALD TRUMP."
We'll MR. Trump in his wisdom a few years back listed his home for sale with an agent willing to take his home at 1.3 million. The comps at that time were 1.25 mil for well appointed and updated homes in this area but overpriced enough that there were no offers. He fired his agent (not me by the way, I had an intereted buyer-another story, for another day maybe). So he went FSBO lowering the price to 1.25 mil for a while then lined up an auction company. Starting price $599k with a reserve of course. Auction comes best offer 900's. No sale More FSBO time lower the price, lower the price then October hit. Market collapse. He held his ground at 1 million slightly over the last auction price. About a month ago he hit the auction again starting at about $200k and is now in contract as a short sale. County records show the home encumbered in the low 800's which is about the fair market value of the home today.
Let me try to "set the stage" for the answer to your question.
Foreclosure is the "end" of a process that begins when a homeowner falls behind on his mortgage payments. Usually when the homeowner is three months behind, the lender issues a "Notice of Default" which formally tells the homeowner that they are in violation of the terms of the mortgage contract and unless it is brought current the lender has the right to foreclose. (Hold on, we're getting to the answer you want)
Many times the homeowner is able to either "catch up" on payments or make satisfactory payment arrangements with the lender and that is the end of it.
If the homeowner truly can not make the payments and there is no reasonable way they will be able to in the next few months, the best option is usually a "short sale". That occurs when 1) a homeowner can not make the payments AND 2) the amount of the mortgage is more than the home will sell for. In this situation the home is put on the market in the traditional way (seller chooses a local Realtor, etc) and it is like any other home sale EXCEPT that, because the lender will be losing money on the transaction, the lender has the right to approve (or reject) any buyer's offer that the seller agrees to. Banks are overwhelmed with short sales and and it will typically take at least 30 days, more likely 60, 90 or even longer to get an answer from the bank.
If a short sale is not successful (or not tried) then the lender has the right to "Foreclose". That means the home goes for sale at an auction on the steps of the county courthouse. This is not like any auction you've ever been to and the biggest reason is that the buyer must have cash or cashier's checks for the entire amount of a successful bid. Many times the bids are less than the lender thinks it might sell for on the open market. In that case, the lender will usually out-bid anyone else on the courthouse steps and literally buy the home.
Then the home has been "foreclosed on" and the lender puts it on the market with a Realtor and it sells like any other home.
Just to give you some idea of the scale of what's happening in San Ramon, there are currently 75 homes owned by a lender (they call it Real Estate Owned, or REO for short). 14 of those are actually listed for sale with a Realtor today. Sooner or later all the others will come on the market, because banks really don't like to own real estate. There are also 31 "short sale" homes on the market today, and 81 that are neither foreclosures nor short sales.
I hope that helps. Feel free to ask more questions.
There can also be a problem if you have not seen the house. The houses are sold â€œas isâ€ and with no inspection contingencies.
A house on St Michael Ct. in San Ramon was recently offered for sale as a short sale according to our local MLS. This house meets the description that you have given. It was priced at $549,900 and did not sell.
On the other hand, if you gotten this information from a RealyTrac posting, it is a notice of a default on a loan of that amount and has nothing at all to do with the value of the house.
It looks to me like you need a Realtor to help you.
John Juarez, REALTOR
Windermere Properties of the East Bay