So I see these foreclosed properties that say $110,000 loan. What does that mean?

Asked by Diane, Los Alamitos, CA Thu Apr 10, 2008

does that mean that is the auction price? what about liens/lawsuits? how can an average person buy one of these with confidence they are getting just a house and not a nightmare?

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8
Rick Sharga, , Irvine, CA
Wed Apr 16, 2008
Diana: Welcome to the often-confusing world of foreclosure properties!

As noted below, the $110,000 is probably the amount of the mortgage that's in default. Generally speaking, the homes are worth more than the loan amount. In that case, there may be room to arrive at a negotiated sales price that's somewhere between what the home is worth and what's owed on it.

Unfortunately, many homes in foreclosure today, especially in CA, are actually worth LESS than what's owed on the loans, which means the best options (if you really, really want a particular house) are to try to arrange a short sale (you pay less than what's owed to the lender) or wait for the bank to repossess the property and then negotiate with them.

When you're looking at a foreclosure property to determine what the property might be worth, you need to check out the primary and any secondary loans, take a look at comparable sales of nearby homes, see what's listed nearby on the MLS to gauge current market conditions and get an estimate of what the home is worth in today's market. You can certainly work with a Realtor who specializes in foreclosures to do this. For many homebuyers, that is absolutely the best option.

You can also use information available on sites like ours http://(www.realtytrac.com), where we list all of the loan, comp and MLS information with each property. If you find a house and decide to move forward on a purchase, working with a title company will get you the information you need to protect yourself from outstanding loans or other liens. To be extra safe, you should probably avoid Trustee Sales (foreclosure auctions) which require cash payment and where you typically don't get to inspect the property first. Very risky for novice buyers. Far safer to buy a bank-owned home or to buy directly from the owner when they're in the early stage of default.

Don't let anyone talk you out of buying a foreclosure home. It requires more work on your part, and probably your agent's, but the potential savings can be well worth it. According to sales data that we've tracked for the past two years, the average savings on a foreclosure purchase have been about 25%.

You can find a wealth of free information about foreclosures (no subscription required to see this) at: http://www.realtytrac.com/foreclosure/overview.html

Good luck with your home search!
2 votes
Michael Barr…, Agent, Irvine, CA
Sun Apr 27, 2008
Hi there Diane, this could mean that there is more than one loan outstanding on thr property. The easist way is to review a title report or to pull the tax records. I can do either for you in minutes if you would like to receive this informaiton

Kind Regards
Michael Barron
michael-barron@sbcglobal.net
1 vote
Oc Buyer, Home Buyer, CDM
Wed Apr 23, 2008
There were two articles on Bankrate last week that I thought did a good job of explaining foreclosures and short sales and how to make them work for you.

http://www.bankrate.com/brm/news/realestateguide2008/buying-…
http://www.bankrate.com/brm/news/realestateguide2008/buy-a-f…
1 vote
Sharon Parker, Agent, Sugarland, TX
Wed Aug 20, 2008
no, this is property that being sold at that price. You would need to get a agent that is working for you, and they should make sure you are not getting into a nightmare .
0 votes
Emily Knell, Agent, Huntington Beach, CA
Thu Apr 24, 2008
I am a Realtor in the Los Alamitos / Rossmoor area, there is probably more than one loan on this property, since you can't buy ANYTHING in Los Al for $110K. This may be a 2nd or even 3rd loan that's against the home. Feel free to email me with the address & I can look up the tax record easily (about 1min.) on any home you see advertised as foreclosed & tell you exactly how many loans are or were on the home & for how much the bank took the property back for. emilyknell1@yahoo.com
0 votes
Sandra Carli…, Agent, Newport Beach, CA
Tue Apr 15, 2008
No, it's not the auction price. It is most likely the amount of the loan that is currently defaulted and recorded a notice of default first.

As with any home, you want to make sure to have all of your inspections so that you know what you are getting into. Checking it out yourself is the only way to make sure you aren't getting a nightmare or money pit.

My advice is to avoid them. You can certainly get a better deal from the other 90+% of home on the market in Cypress (or Los Alamitos). These other homes are probably better maintained, have a better location and the owners probably have more negotiating room (equity) than the few foreclosures you are coming across in those areas.

You will probably also avoid a multiple offer situation which you will run across with foreclosure properties. Foreclosures, bank owned (REO) properties are the only sellers market right now.

Do you really want to say "Yay, I won the bidding war in a buyer's market!..." ? The real deals can be made on properties that are not distressed, but have sellers who need to sell.

Let me know if you would like help making a real deal happen.
Web Reference:  http://www.OCBeachBlog.com
0 votes
Donna Grady, Agent, Wilmington, NC
Fri Apr 11, 2008
I think that you are looking online at the website for foreclosures. These sites only list the principal amount of the mortgage that is about to be foreclosed on. These sites should be banned. They allow you a 14 day free peak and then you pay them $12 to 14 a month to continue. They are just teasers like the old peak shows at the fair. These websites unfortunately pay the banks/lenders for the list of homeowners that are only two months behind in their payments. Then they make money off people who believe that they can get rich quick by purchasing this property.

You probably saw that the homeowner's loan was $110,000. Maybe the home is worth $330,000. Do you honestly believe that you will get a home for that amount of money worth twice as much? Most of the time the homeowners will make up the payments by hook or crook to stop the foreclosure procedure. If they can't what usually happens is the foreclosure process gets started. Arrears, interest and attorney fees start accumulating. By then the payoff is above the mortgage balance. Most of the time, the foreclosure goes to sale at the courthouse steps. At that time the title search has been done by the attorney. The bank knows all the other creditors/liens and any other mortgages that attach to the property. Then they list the property with a Realtor that specializes in bank owned properties. Then if you want to buy it once it is listed chances are you have a clean title to the property and are not buying the lawsuits that you would buy if you bought at the courthouse steps. Now ask yourself.... what else could you have done with the money that you paid this website? You can get the same information by going down to the local county courthouse and looking at their records. Now think of all the other people just like you that are paying them $12.00 a month. Just who is getting rich here?

Have you checked with others to see if anyone has gotten great deals doing this? The ones that I know that have, do this for a living and have systems in place to make sure that they get a deal but they hang out at the courthouse and even when they make a purchase there is the 10 day upset bid period that may deplete their profit margin. Usually the average person ends up getting burned.
0 votes
Lisa Mordecai, Agent, Jacksonville, FL
Thu Apr 10, 2008
I am thinking that is the amount that is owed on the property at present. You should do diligence on the purchase of a bank owned property as you would any property. You should hire a certified home inspector and have any inspections you deem necessary to assist you in your decision. Even if the property is offered as is with no repairs made by the sellers. You can certainly make an offer contingent on inspections.
0 votes
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