Foreclosure in San Francisco>Question Details

Julia, Home Buyer in San Francisco, CA

How does one buy a foreclosed property?

Asked by Julia, San Francisco, CA Mon Mar 3, 2008

Do you pay the entire price up front? Can you get a loan from the bank? Are there closing costs? Is it recommended for a first time home buyer? Do you use a real estate agent?

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Julia,

There is a lot of misunderstanding on this topic, but essentially there are two kinds of foreclosure properties:

1. Buy at auction on the courthouse steps. This is not advisable unless you really know what you're doing. You need to pay all cash, you will be bidding against experienced investors, and there may be issues with the property that you won't discover till after you own it. If you have an agent/broker help you with this you will need to pay them yourself.

2. Buy an MLS listed property that has been foreclosed on. While you won't get the same level of disclosure on these properties because the bank never occupied the property, you will get clear title and the ability to do inspections, and you can get a loan on the property. You would be best advised to use an experienced, knowledgeable agent/broker to help you as the process of buying a foreclosure has some differences than a regular purchase, and the commission is paid for by the bank. This is a far more advisable approach. If you would like more information our contact info is below.

Best Regards,

Lance King/Owner-Managing Broker
lance@fixedrateproperties.com
415.722.5549
DRE# 01384425
1 vote Thank Flag Link Mon Jun 27, 2011
Most of your questions depend on the situation. Wouldn't recommend it to a first time buyer unless you have a competent realtor.
1 vote Thank Flag Link Mon Mar 3, 2008
Julia,

There is a lot of misunderstanding on this topic, but essentially there are two kinds of foreclosure properties:

1. Buy at auction on the courthouse steps. This is not advisable unless you really know what you're doing. You need to pay all cash, you will be bidding against experienced investors, and there may be issues with the property that you won't discover till after you own it. If you have an agent/broker help you with this you will need to pay them yourself.

2. Buy an MLS listed property that has been foreclosed on. While you won't get the same level of disclosure on these properties because the bank never occupied the property, you will get clear title and the ability to do inspections, and you can get a loan on the property. You would be best advised to use an experienced, knowledgeable agent/broker to help you as the process of buying a foreclosure has some differences than a regular purchase, and the commission is paid for by the bank. This is a far more advisable approach. If you would like more information our contact info is below.

Best Regards,

Lance King/Owner-Managing Broker
lance@fixedrateproperties.com
415.722.5549
DRE# 01384425
0 votes Thank Flag Link Mon Jun 27, 2011
Julia...

If you are talking about buying a foreclosing property at the auction steps....

Then you must have the entire purchase price in cashier's checks at the time you are bidding. Prior to the auction opening up, the auctioneer will ask, "Who is present regarding the property at ### Your Street." You raise your hand, along with other interested buyers, then one by one, you each privately show the auctioneer your cashier checks, establishing the maximum amount the you could possibly bid, if you so desire. The auctioneer has to make sure that you don't bid up to a certain price and not have the funds. The auctioneer then starts the bidding, at a minimum amount set by the trustee (or lender, if they are willing to take less than what is currently owed to them). The bidding continues until a winning bidder prevails. Then, that bidder must sign over the cashier checks to the trustee company and give the funds immediately to the auctioneer. They will then process the funds and deliver a deed to you within 72 hours typically.

Warning....There are two HUGE errors that can be costly in this sort of purchase: 1) failing to pay for and exam a preliminary title report (could reveal issues that may stay with the property), and; 2) failing to adequately inspect the property (repairs needed, tenants, etc.). As most of the answers given, I would not recommend this type of purchase for a first time buyer, unless you have a competent representative who has done this before. Yes, you could use an agent, but you would be responsible for compensating him/her.

As most of the other answers pertain to short sales or buying before a foreclosure/trustee sale, I shall leave that area to others. Good luck.
0 votes Thank Flag Link Fri Jun 24, 2011
I'M LOOKING TO USE THIS FORECLOSURE PROPERTY AS A RENTAL ANY SUGGESTIONS
0 votes Thank Flag Link Tue Jun 21, 2011
Hello, the advice you gotten so far is great but make sure that these foreclosed properties won't turn into nightmares...get services from a company that can prescreen them for you...well worth it.
0 votes Thank Flag Link Wed Jul 30, 2008
Hello Julia,

Anyone can buy foreclosure but you need also to beware of that kind a foreclosure transaction will be lengthy and you don't know when you can acquire the property due to its complicated process. You have to be in a ready to buy status that means you need to be pre-qualified with a lender ( remember pre qualified a loan is totally different with pre-approved). When you submit your office you have to have that prequalified letter from the lender with the loan amount and the rate of the interest. Along with those prequirement you need to have at least 3% of the purchase price for deposit. A copy of the check has to be send along with your offer. You will have to be patient and wait for the answer from the bank which might runs from 0ne weeks to 3 months. No one can know the time exactly. if you are buying a foreclosure for investment please beware of the laws of redemption rights which allows the owner to get his or her property back plus damages compensated by you right after you acquired the house up to after 2 years later. Do your homework and best way work with a Realtor who knows about foreclosure like in the back of hi/her hand. Good luck.
0 votes Thank Flag Link Wed Mar 12, 2008
My question is why wouldn't the individual purchase a foreclosed property or one in which an NOD has been filed upon if they have a competent Realtor to guide them through the process. If first time home-buyers can purchase a property through short sale or by making an offer and negotiating with a bank once it goes back to them, what does it matter if they're first time or fourth-time buyers...the process is still the same right? And the short sale process does use a Realtor, if the buyer is buying the residence as their primary residence and not as an investment property...most first time buyers receive some type of government financing, and with the current market situation, why wouldn't a first-time want the best price and deal that they can receive...? Buying homes at auctions and trustee sales is a process that I would leave to the savvy investors and experienced individuals. However, during the 3 months and 22 days (112 days) foreclosure process, and then during the time in which the bank has repossessed the property, make offers under the guidance of an experienced Realtor and take advantage of the current market situation. Hope this helps
0 votes Thank Flag Link Mon Mar 3, 2008
Julia,
Foreclosures for a first timer homebuyer is NOT reccomended!! The due diligence is zero and must be done prior to the actual foreclosure which in our County of Sonoma is done on the courthouse steps. Now adays most properties going to auction are ending up BACK in the hands of the Lender unless the Lender wishes to also sell the property on the courthouse steps. If you're tracking foreclosures then you know the process and have been notified of the property by the notice of default filing. From that point it is 122 days to sale unless postponed by the lender. During that time you can attempt to do your due diligence on the property.
The gentleman who spoke below about "taking over the mortage of the seller" is taking the property "subject to" the lenders mortgage and is not allowed in California. The main reason we are seeing the huge increase in foreclosures is the lack of equity in the property. If you "take over" the current mortage payment you no doubt have paid TOO MUCH!! This is the stuff of late night TV where the guy says he'll take over the loan, not make any payments, and try to negociate a super deal with the lender of record by getting them to go "Short" on the loan pay-off. Good luck with that scenario. You might just as well wait for it to come back on the market as an REO (bank owned property).
But you DO have to pay in the form of a cashier's check that day or work out a deal with the lender of record. You usually DON'T use a Realtor/licensee for this. You are ON YOUR OWN!! If you want to learn how it is done go hang out and watch the auctions when they happen. See who is bidding, who is not. Saddle up to the savvy ones and ask if they could show you the ropes. BE CAREFUL!! If this were the Clark Howard show all is little whistles and bells would be ringing to high heaven!!
Do you think you're going to get a steal of a deal? You just might but then again you might get totally taken to the cleaners. In the foreclosure process all consumer disclosures and protections pretty much go OUT THE WINDOW.
0 votes Thank Flag Link Mon Mar 3, 2008
When buying pre-foreclosure you can take over the mortgage of the seller, this way you can avoid paying all the money upfront. When buying at foreclosure, via an auction, you usually have to have a cashiers check for a certain percentage of the property, and then have a period of time to pay the rest (say 30 or 90 days). But when buying at foreclosure you usually don't get to see the property and a title search is crucial to see if there are any liens on the home. It's wise to get advice from an experienced expert to help you walk you through the process if this is your first time buying at the foreclosure stage. If you buy an REO, after a property has foreclosed, then all liens are the banks responsibility.
http://investmentpropertiesinfo.com
0 votes Thank Flag Link Mon Mar 3, 2008
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