Home Buying in 92069>Question Details

Diana Soderb…, Home Buyer in California

I found a house, its says it is a Notice of Default. The estimated loan balance is 33,059. Does that mean?

Asked by Diana Soderbeck, California Mon Jul 14, 2008

that is all you pay for the house or are you still charged market value comprable to the neighborhood, like 425,000. If so what is the advantage of buying a house in forclosure?

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Richard Littlefield’s answer
Well it means that you have a good chance of getting the house a s substantial discount. This loan balance may be a 2nd that is foreclosing though. Basically is is the loan amount on the loan that is foreclosing.
0 votes Thank Flag Link Fri May 10, 2013
The price is agreed upon between the current owner and the purchaser - and the current owner's lender, if the purchase price is less than the mortgage (a "short sale"). The default amount is simply the amount by which the original buyer is behind in their payments.

A property in "notice of default" status still belongs to the purchaser/owner - but it's getting dangerously close to foreclosure. If the house is foreclosed upon, then it will be sold at auction to the highest bidder. Most of the time, the highest bidder is the lender who's owed the debt that caused the foreclosure in the first place - but not necessarily.

If the lender takes the house at the auction, then they will try to sell the house - that's an "REO".

So - pre-foreclosure, you negotiate with the previous owner and maybe their lender. Post-foreclosure, you negotiate with the new owner, who will likely be the lender.

Realistically, you can probably offer the lender a fair amount under comparable homes in the neighborhood - not a ridiculous amount, the people on the other side of the transaction aren't idiots and they're not going to sell a $500K asset for $50K. On the other hand, the bank doesn't want to own a bunch of vacant houses, nor become a landlord and rent those vacant houses to tenants. The bank wants to get rid of the houses and concentrate on the banking business.

Selecting a reasonable offer is going to involve analyzing both the prices of comparable houses, and the trends in the market, as well as for this particular property. If the bank has been sitting on a vacant house for 270 days, they're a lot more motivated to make a deal than if they just foreclosed last week. If the property in question is the only property for sale in the area, they're not as likely to make a deal versus the situation where half of the houses on the street are REO's that have been on the market for > 180 days, with declining prices and no serious offers.

The advantage to buying a home that's been foreclosed or is threatened with foreclosure is that you can get the property at a discount. On the other hand, you're walking into an unpleasant situation, and the property won't have enjoyed careful maintenance and cleaning before you move in.
4 votes Thank Flag Link Mon Jul 14, 2008
A notice of default could be filed if an owner misses only one payment...or is late. Possibly the owner paid his first mortgage....and the second was late, creating a NOD notice. Homes selling for pennies on the dollar do not exist...especially in California! Home would sell for market value....maybe 3-5% under if it were distressed.
Web Reference: http://www.cindihagley.com
2 votes Thank Flag Link Tue Jul 15, 2008
The Hagley G…, Real Estate Pro in Pleasanton, CA
Dear Diana,

That means the owner will be facing the forclosure process to start soon if he or she doesn't try to bring the mortgage up to current. The short sale will take place if he or she will try to sell the property to pay back the loan. If the seller's financial statusis qualified for short sale (that means he or she has no asset except the house in foreclosure) then the lender might consider to accept the offer once it is submitted to them. based on the loan the sellers owed. The amount of the loan had to paid plus the cost of process paper for forclosures such and such. Bank owned properties will be sold close to market price not shortsale properties. You can request more information in details on my website.
1 vote Thank Flag Link Mon Jul 14, 2008
TheNotice of default means that the bank recorded a default of $33,059. That is the amount of money the owner is in arrears for. If and when marketed the house will be listed for a fair market value. You may be able to negotiate but keep in mind what the total note equals. not what is delinquent. Your experienced buyer's agent will guide you through the process.
0 votes Thank Flag Link Thu Mar 19, 2009
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