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Andrew Hardi…, Home Buyer in 91403

question about financing and foreclosures...

Asked by Andrew Harding, 91403 Wed Apr 15, 2009

If I have cash available for a down payment and am qualified for typical financing can I purchase a house that is in foreclosure? Are all foreclosure deals different when it comes to financing?

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Hi Andrew,

Adding to Bob's answer, you can usually purchase a house with typical financing in stages 1, 2, and 4 (see below). One big consideration, most common on step 4, is the CONDITION of the property. If there is unfinished construction, gutted or no kitchen, no bathrooms, etc., this can be a red flag for your lender. Even here, there may be special financing available for these scenarios.

There are several stages to a foreclosure. In short, they look like this:

1. Notice of Default (NOD, minimum 90 days)
2. Notice of Sale (minimum 28 days)
3. Auction (Sale)
4. Bank Owned (REO, foreclosed)

During steps 1 and 2, a property will often be listed as a short sale. Here, you can typically purchase with conventional (20% or more down) or FHA financing (as little as 3.5% down). Short sales can require a bit of patience while waiting for the seller's lender(s) to approve the deal (since they're taking a loss). Some go quickly, others can go slowly. There are several factors that can have an affect on how smoothly the procees will go.

Step 3 is mainly a cash deal, also with quite a bit of risk involved. Most properties do not sell here.

Step 4 the property gets put back on the market by the asset manager with a different Realtor (anywhere from a week to several months after step 3). At this point, it can typically be purchased with conventional or FHA financing.

Things to consider about step 4:

Usually priced below market to attract a lot of attention. You will most likely be competing with other buyers here. We've seen 20-30 offers on some properties. Again condition can play a roll on financing if some of the main systems are missing.

As Bob said, it is best to work with a Realtor who has had experience in these types of transactions.

Feel free to contact me anytime.

Tom Goeders, Realtor, SRES
Keller Williams Realty
http://www.TomGoeders.com
tomgoeders@kw.com
(818) 378-7602
0 votes Thank Flag Link Wed Apr 15, 2009
Andrew,

As one of the gentleman answered below, you will probably have to have a 20% down payment to purchase a bank-owned property.

I have a couple of different lenders that I work with and recommend. If you would like to speak to them about your financing questions please email me and I will send you their info.

Email: dotchance@ureach.com
Web Reference: http://www.DotChance.com
0 votes Thank Flag Link Sat Apr 18, 2009
Andrew,

Financing a foreclosure home is the same as buying a property from a typical seller. The financing does not change. The bank that is facilitating the foreclosure may request you to pre-qual with their bank to protect themselves. I work with foreclosures and know the in's and out's of how to get the most out of the banks. If you would like more help with this, give me a call at 310.985.4238.

p.s. not sure if you are from the 91403 zip or want to buy in that zip, I live in that zip code, I am very familiar with this area.

Best,
Phil Missig
pm@PhilMissig.com
0 votes Thank Flag Link Wed Apr 15, 2009
Andrew:

By typical, I am assuming you are referring to a downpayment of at least 20% of the purchase price. If that is so, yes you can purchase a house in foreclosure. Most lender owned properties, which are sold by asset management companies of the bank, are similar deals, where you will be given a limited amount of time to do inspections and remove all contingencies including that for obtaining a loan. In addition, most banks also will levy a penalty, calculated on a per diem basis, in case you are unable to close on time.

You must work with an agent who has transacted on foreclosure properties to avoid pitfalls during the offer and escrow process.

Bob Khalsa
Broker
United America Realty
bobfoxbat@gmail.com
213-926-5847
0 votes Thank Flag Link Wed Apr 15, 2009
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