How long after a trustee sale does a home enter the market?

Asked by lmc, Tracy, CA Tue May 5, 2009

I'm in the market to buy a home and have noticed that inventory is shrinking. In doing research I found a site that lists homes that are being sold via a trustee sale. In the area I want to buy in there are 249 homes that will be sold in May. How long does it take to see those homes listed as an REO?

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Grace Hanamo…, Agent, Cupertino, CA
Wed May 6, 2009
Hello lmc and thanks for the information.

The Notice of Default or NOD is the first step in the foreclosure process--we call this the "preforeclosure" property. Here in California from date of recordation of the NOD to the date of sale can be roughly four to five months. The last step is the Notice of Sale, which usually is provided to the homeowner just 30 days prior to sale. Anytime during the "default period", the homeowner may ask for additional time to work things out, request a loan modification, request approval for a short sale, or allow the home to be sold. In some cases, as I mentioned previously, the homeowner just "gives up" the home by transferring to the bank a deed-in-lieu, which, basically, returns ownership of the home to the bank by the owner without having to go through a public transfer of ownership. As a result of the many ways in which a Trustee's Sale may be stalled, there are only a small percentage of homes that will be actually sold on the courthouse steps on the scheduled date of sale. Here in Santa Clara only about 10 percent of the homes scheduled for sale make it to auction, and the amount in Tracy may be slightly higher--say 25-30 percent, but the vast majority of the remaining homes for sale will end up being cancelled or postponed on the very day of the sale.

I would not recommend to anyone that they purchase a home in a Trustee's Sale at this time since most of the homes have sales prices that are less than the outstanding amount of mortgage owed--a situation we call "being underwater" or "upside down". At a Trustee's Sale, often there are no bidders on the home except the bank because the "minimum bid" would be equivalent to the outstanding mortgage plus expenses on the home.

Even after the home is sold back to the bank, the bank will often take as long as 90 days for the home to reappear on the MLS, if it shows up there at all. Because there is no requirement that a home ever be advertised on the local MLS, REO properties may also show up exclusively on the websites of asset managers or foreclosure disposition agents or for larger brokerages, such as Coldwell Banker, might be listed only on CB's exclusive listing websites. Part of the delay in bringing a home to market is based on practical issues--clearing title issues, removing items left by the previous owners, cleaning and preparing the property for market. Part of the delay is also purposeful in timing the home's appearance in a way that does not produce a huge glut of homes at one time, as well as bringing the home for sale at optimal periods in the year. Either way, don't expect most of the homes that foreclose in any month to appear for sale for about 30-90 days.

I hope this answers your question. Good luck and happy house hunting!

Grace Morioka, SRES, e-Pro
Area Pro Realty
San Jose, CA
1 vote
lmc, Home Buyer, Tracy, CA
Tue May 5, 2009
Thank you for information Grace. The homes that I'm referring to are not notices of default, they are homes that have an actual sale date set for May. I have noticed that some sales are being postponed or canceled but the vast majority are either sold or go back to the bank. I'm not interested in purchasing them at the trustee sale because I need to finance my purchase. Knowing that these are actual sales and not notices of default would still on 10% appear as REO's on the MLS?
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Grace Hanamo…, Agent, Cupertino, CA
Tue May 5, 2009
Hello lmc and thanks for your question.

While 249 homes may be slated for sale in May, only a very small percentage of those homes will ever be sold at a Trustree's Sale. In many cases, a homeowner will pay the past due amounts or work out a deal with the mortgage holder to sell the home short, provide a deed-in-lieu or modify the loan. In fact, even with the market at its most active, less than 10 percent of the homes that begin with a Notice of Default will end being sold at auction to become REO properties, so for your area, for example, at most, only 24 or 25 homes will become REO properties in the area where you wish to live.

Once a home is sold back to the bank, it may take as little as two weeks and as much as four months for a home to reappear for sale as an REO property on the MLS or, privately, on an asset manager's website.

The best way to find and purchase an REO home in your area is to work with a qualified real estate professional who has experience in handling the purchase of REO properties with buyers.

Good luck and happy house hunting!

Grace Morioka, SRES, e-Pro
Area Pro Realty
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