My Blog

Purchasing a foreclosure property can represent significant savings over a traditional home purchase, but the process is more complicated. Foreclosure properties can sometimes be purchased for 20–30% below market value or more.  When attempting to buy a foreclosure property it’s important to know the market value of the property as well as  other financial details, such as the default amount, the amount of the outstanding mortgage loan (or loans) and any tax liens on the property. Once you know what the property is worth and what is owed, you can assess whether or not the home represents a good value and develop a strategy to negotiate the best price. I have access to information on ALL properties in any stage of foreclosure.  If you are interested in finding out more about foreclosure opportunities in any neighborhoods or areas you are interested in, please contact me and I can provide you with the information you need.

Lis Pendens/Pre-Foreclosure Properties

These properties are considered “pre-foreclosure” and are in the earliest stage of the foreclosure process. The property owner has been given notice that the property may be foreclosed upon if the debt has not been settled or paid in full by a pre-determined date. In many cases the homeowner will resolve the debt and keep the property. In cases where this isn’t possible, a Lis Pendens property can represent the greatest potential savings for a home buyer or investor, but these types of properties can also take the longest to purchase and require the most work.

Since these properties are still under the control of the home owner all negotiations need to be conducted directly with this individual unless the homeowner gives written permission to negotiate a "short sale" directly with the bank. This is a situation where the bank agrees to accept substantially less for the home than what is owed to them.  Short sales can take many months to complete and are best handled by those who specialize in negotiations with banks. I have the ability to assist my clients with short sales through the help of a third party expert.

In my experience the most successful strategy with pre-foreclosure properties is to approach the home owner with a legitimate offer (sometimes several offers or choices) backed up by pre-approved financing or cash.  "Alternative" financing or "creative" financing can also be used in this situation.  If I am acting acting as your representative for a pre-foreclosure property I can help you determine what strategy will work best depending on the situation.  I will also help you draft an offer which saves you money, present the offer in the proper manner, and make every effort to get the deal closed for you.

Auction Properties

If a default isn’t resolved during the Lis Pendens phase of the process, properties are auctioned at the courthouse in the County the property is located in. These auctions take place daily, weekly, or monthly depending on the county. Interested bidders need to register on the day of the sale and must have a percentage of the winning bid amount in cash or a cashier’s check available at the time of the auction. Balance of the payment is usually due within 24 hours, or sometimes the same day. Additional costs and fees may be added to some final judgments listed and some sales are subject to cancellation by order of the court.

Foreclosure auctions represent an opportunity for great bargains, but also carry the greatest risk for home buyers. Generally properties won in auctions are purchased “AS/IS.” There is seldom an opportunity to inspect the property or get a formal appraisal, and in some cases you won't be able to have a thorough title search completed due to time constraints. Also, there may be other outstanding liens on the property that will become the responsibility of the winning bidder. Many auctions are attended by “insiders” whose role is to inflate the winning bid price and many are dominated by pros who specialize in buying properties at auction. If you are interested in buying properties at auction make sure you do as much research as possible before the auction in order to minimize your risk.

Bank-Owned Properties

In our current real estate market many properties are being foreclosed on by the lender prior to a solution being worked out by the owner. This happens either directly (through a foreclosure attorney hired by the bank) or through the auction process. These properties are referred to as Bank-Owned Homes, or REO's (Real Estate Owned). Potential savings on these homes can also be substantial and there are fewer risks involved. Banks are responsible for insuring that the title is clear and sometimes they repair the property to a minimum level. Most of these properties are eventually listed for sale by a real estate brokerage, although it’s sometimes possible to negotiate a deal by approaching the lender directly before the property is listed for sale.

As is the case with all foreclosure properties, there are some potential complications concerning Bank-Owned homes. For instance it’s sometimes difficult to identify which bank actually has possession of a property, as these homes are treated as assets and sometimes sold to other banks. With larger financial institutions it can be difficult to locate the person or department that handles REOs. In any case, the best way to successfully purchase a Bank-Owned home is to present the lender with a reasonable offer utilizing a real estate contract with a deposit and a pre-qualification letter. I would be happy to assist you with this  process.

I hope this information gives you a better understanding of the foreclosure process. As a full service Realtor I’ll be happy to help you find a home that best suits your needs, whether it’s a foreclosure property or a traditional home purchase, and to help you arrange the best financing possible.