I am looking into foreclosure properties in my area, but am in desperate need of some guidance!

Asked by Rachael Taylor, Croydon, PA Thu Jan 15, 2009

takes out a $125,000 loan for a house that they purchased. If that person becomes delinquent on their payments by $41k, is that the amount the property goes for in auction? If I purchased such a house for the $41 asking price, would I then be responsible for paying off the remaining balance on their $125k loan? Also, when researching liens, does the statement real debt fixed in the amount of.. mean that is exactly what is owed? Do the previous owners have a certain amount of time to purchase the house back once it has gone at auction? Any other advice is greatly appreciated! Thank you!

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William Leigh…, , New Jersey
Fri Jan 16, 2009
Rachel: Buying foreclosures is a work for investors and pros, not for people looking for a home, unless they are well equipped to handle the adversity of the situation. These sales are called, "distressed" for a reason!

There are three venues where foreclosed homes are sold and two types of foreclosure.

First, and most typically, there is the Sheriff's sale in behalf of a lender who has not been paid. While the successful bidder does not have to pay for the amount of the loan not covered by the bid, the lender will not usually let a third party take the property for less than the amount owed, since they have little hope of getting the balance not covered from the former owner. Any back taxes go with the property and must be paid by the new owner. There is no forgiveness there.

Second, there is the sale just for back taxes. This is complicated because only the taxes owed for the period are sold and the property owner has a long period to redeem the property by paying a very substantial interest to the successful bidder (who is in essence, a lender to the owner, having paid his taxes for him) but usually on an amount far below the value of the property. This can take years to complete before the tax lien results in an investor owning the property, all the while continued deterioration of the property is usually progressing.

Finally there is the post foreclosure sale. There are three ways to buy a property from whoever owns it after the foreclosure process. First, you might figure out who that entity is, and if it's a mortgage company, they MIGHT take a direct offer from you. I sold one this way by approaching the owner for a buyer client some years ago.

The more normal route is that the new owner puts the property on the market through a Realtor and it gets listed in an MLS. Depending on the astuteness of the Realtor and the owner, the price may be reasonable or may not. I took over a property that had been listed for six months at too high a price of $79,000 and relisted it at $29,000. It had great activity and sold close to the asking price. It had, in my estimate, $50,000 in repairs! The lesson here is that the purchaser must be very diligent in doing their homework. Buying that property with that amount of repairs at $79,000 would NOT have resulted in a good deal in today's market.

The last way that foreclosures are sold is though periodic public auctions. Usually these are properties in poor condition where the new owner feels that the costs of selling through a Realtor are more than the expected revenue will cover. I have purchased a property through one of these auctions for a client but do not regularly keep up with when and where the next auction will take place, not having a regular client interested in having me represent them for a fee.

I hope this fully covers your question and further urge you to find a Realtor who will work with you to find good deals in the regular MLS market, which is truly the best place for the average home seeker to go.
1 vote
Gita Bantwal, Agent, Jamison, PA
Thu Feb 19, 2009
The others have given you good advice. You need to talk to a professional who will guide you. Please not there may be listings that are not in foreclosure with great value. Foreclosures may not always be great.
Web Reference:  http://www.gitabantwal.com
0 votes
Kimberly Mil…, , Wesley Chapel, FL
Sat Jan 17, 2009
The most simple and best answer would be to hire a professional in your area to assist you in your search
Web Reference:  http://www.kmillhomes.com
0 votes
Donald Bradb…, , 18951
Sat Jan 17, 2009
You have received many good replies to your question here Rachael Taylor. Remember, when you are the buyer, in most cases, the Realtor Services are FREE. So please give me a call and I would be happy to assist you.
Don Bradbury http://www.bradburyteam.com
0 votes
Tina D'Amato, Agent, Sciota, PA
Thu Jan 15, 2009
When you purchase a forclosed property that is listed through the MLS the banks have already listed it for a price that they would want for the property. You would bid on that price. If the banks were to accept your offer you would then be "under contract". You would do inspecitions on the property and an appraiser would go into the property to make sure the home appraises for what you would want to purchase it for. A title search would also be done on the property to make sure it is clear of all leins, including back taxes, unpaid hoa (home owners association) fees (if its in a hoa community), etc. Provided everything went fine,you would then close on the property like any other.

If the property is being purchase through sherriff sale, then its a whole other story. I'm not a pro in this area but know enough to know that you would try to purchase the property with out knowing if there were back taxes, leins on the property etc. You would be taking quite a chance unless you had enough time to do the reasearch and invest money (I would suggest a title search) into a property that you might not even get. Alot of the times that banks buy it back.

Now if they bought it for 125,000.00 and they become delinquent by 41,000.00. They would owe the 125,000 plus the 41,000.00. (And they still might have back taxes owed, un paid leins etc.)

In closing, Forclosures can be amazing buys. You need to do your homework, and seek the advice and knowledge of a Real Estate Specialist to help you. Homes that are great buys will not last on the market long and also have a great chance of a multiple offer situation.

Please feel free to contact me if you need further assistance.

Thank you,

Tina D'Amato
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