Home Buying in San Jose>Question Details

Mozeeb, Home Owner in San Jose, CA

What's the right way to buy a foreclosed home?

Asked by Mozeeb, San Jose, CA Fri Feb 10, 2012

Help the community by answering this question:


Wait for it to be listed by the bank as a REO or bank owned home. Make an offer through your own agent and follow your agents advice.
2 votes Thank Flag Link Fri Feb 10, 2012
Thank you for your question Mozeeb:

Tim Moore, robert Chomentowski and Teri Velios gave you excellent answers.

You have received some excellent answers. Foreclosed homes can be purchased at auction on the couthouse steps, however you must pay all cash in the form of cashier's checks on the spot, there is no financing, there is no oppportunity for inspections, there is no guarantee of good title, there is no title insurance and there are NO REFUNDS.

I have seen many people LOSE a lot of money at foreclosure auctions on the courthouse steps.

You must also pay off all of the senior liens, unless you are actually getting a senior lien. To know whether or not you are buying a senior lien or a junior lien, you must be very good at searching the Records of the County Recorder. The auctioneer will not tell you whether you are buying a senior lien or a junior lien. In fact in most cases the auctioneer does not even know whether or not the interest that he is selling is a senior lien or a junior lien.

Essentially, as Tim Moore recommended, the safest way to buy a foreclosed property is to wait until that property is listed with a REALTOR. That way you do get that property free of all liens. You get a guarantee of good title, and title insurance. You have the opportunity to do all of the inspections before you buy so you know what it is that you are getting.

I recommend that you select a good REALTOR who has a great deal of experience with the Real Estate Market. Your REALTOR represents your interests and will get the best deal for you whether that is a foreclosed home, a short sale, or a regular sale.

Thank you,
Charles Butterfield MBA
Real Estate Broker/REALTOR
American Realty
Cell Phone: (408)509-6218
Fax: (408)269-3597
Email Address: charlesbutterfieldbkr@yahoo.com
1 vote Thank Flag Link Fri Feb 10, 2012
Buying a REO/Bank Owned Property

Buying a foreclosed property can differ in many ways than other more standard transactions. All offers are contingent on financing and must be accompanied by a pre-approval letter. Some banks require a pre-approval letter from a certain lender, so be sure to read guidelines before submitting an offer. All cash offers require proof of funds with the letterhead of where the funds are being held and the buyers name listed. Actual account numbers can be blackened out, as long as buyers name is easily visible. Write your offer as seller chooses the title company as they have already started preliminary title work on these properties.

All offers must be written offers, on an As-Is contract only Some banks supply addendums in advance, and if that is the case it will be in the MLS as an attachment and should be signed and dated and submitted along with your offer. In most cases, however, the bank addendums are provided only after buyer and seller come to agreement. At that time, the bank will send their bank addendums/counter offer for buyer's signatures. Please note at this point, the bank has still not signed anything, and most likely will not sign until ALL forms have been signed by the buyer. Your offer is considered a pending contract until it is returned from the bank/seller with their final approval. In the interim, all offers that come in must be presented. When signing and initialing a bank addendum, do not alter it in any way or it will be rejected.

The usual time frame for a response to your offer is 3-5 business days, although sometimes a little sooner and occasionally a bit longer. Allow plenty of time for acceptance, and for closing the deal, 30-45 days in most cases.

If you are requesting seller concessions for buyers closing cots, pre-paids, or repairs, make sure those are requested in the written offer, as adding these things at a later date can be very difficult and most times impossible. If you are writing an offer for an FHA or VA purchase, please make sure the property will meet the standards for this type of financing. The majority of the time, repairs are not permitted prior to closing. Ask the lender if they allow the buyer to escrow their own funds for repairs.

Once you have a fully executed contract, time is of the essence. All inspections must be done in a timely manner according to the contract. Should the buyer not be accepting the conditions, written notice must be obtained prior to end of inspection period along with a signed cancellation and release form. Some banks will make earnest money non-refundable after the end of the inspection period. Read your addendums carefully.

Please note that bank owned properties closings are considered mail-aways, because the title companies that are used to close the transactions are usually located out of our general area. Some will send a mobile notary to the buyers agents office to close the transaction and then all documents are overnighted to the title company, but it is not considered officially closed until all original documents and funds are received.

A lot of foreclosures are going into multiple offer situations. Most buyers think that if they have the highest purchase price, they're going to get the property. Often this is not always the case. One of the big things they look at is the timeframe for the inspection. This is a contingency on the contract and the banks want it satisfied ASAP. Instead of the usual inspection period of 15 days, if you can do it in l0 days or less, the better. Another is the timeframe for closing. If paying cash they usually prefer the closing date to be no more than 2 weeks. A conventional loan can be 30 days and FHA 45. Just make sure you are prepared to close in the specified time or you could be charged $100 per day or more for each day beyond the original closing date. Also a larger deposit generally indicates a more serious buyer in their eyes.

Another point is to not go into another month. For instance, if you can close on the third week of the month it’s usually preferred. They usually don't like to close in the last few days of the month because it might have to be extended into the next month. The banks like to close out their books each month and not have to extend. This is especially true if it is the end of the quarter. Lower offers have been accepted because the closing date was the third week in the month.

Tammy Hayes, Realtor, Green Lion Realty, Port Charlotte, FL
1 vote Thank Flag Link Fri Feb 10, 2012
I agree with Tim, buying a foreclosure on the court house steps is risky and you need all cash to do so.

Get a competent Broker/Agent to assist you.

I ask why do you want to limit yourself to only foreclosures?
Web Reference: http://www.terrivellios.com
1 vote Thank Flag Link Fri Feb 10, 2012
What Tim states is the only way to buy a foreclosed home unless you have all cash and bid at the trustee sale.
1 vote Thank Flag Link Fri Feb 10, 2012
The process is exactly the same as a normal purchase with a few additional items.
Get approved for your loan
Have sufficient funds for deposit and to close
Plus much more.
Start with your loan....

Jim Mauldwin
Intero Real Estate
Web Reference: http://jimmauldwin.com
0 votes Thank Flag Link Fri Feb 10, 2012
Hi Mozeeb,

I wrote an article on "6 tips to buying an REO." You can read it here: http://activerain.com/blogsview/2304372/6-tips-for-buying-an…

Here is another article I wrote on "Costly Mistakes in Buying Government Foreclosures. You can read it here:

Another articleI wrote to correct the misimpression of buyers on hiring listing agents to represent them in a Bank Owned (RE) transaction titled "Double Ending REO Sales." You can read it here:

I am an REO Listing Agent for Bank of America, Chase, IAS-REO and EMC. I have extensive knowledge and experience on the purchase and transaction process of REO's (foreclosed bank owned homes). I will share this knowledge and experience with you. If you wish to sit down and chat for in-depth information about foreclosed homes, call me at 408-316-0793 or email rpablaza@comcast.net

Glad to be of help.
0 votes Thank Flag Link Fri Feb 10, 2012
Unless you are paying all cash, your options would be bank owned REOs listed on the MLS. You will need a preapproval letter from a lender (not prequalified) there is a difference. You will also need to provide a copy of your bank statements showing proof of funds for your good faith deposit and your down payment. Many banks require this documentation be submitted along with your offer. It also strengthens the probability of your offer being accepted. If you would like me to email you some REO listings, please email me your search criteria, through contact option on my Trulia profile. Kind regards.
0 votes Thank Flag Link Fri Feb 10, 2012
Buying a Short Sale is a good way to purchase. The are more short sales than REO's. The short sale process is faster than before and the competition is less than an REO.
0 votes Thank Flag Link Fri Feb 10, 2012
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