Archive for the ‘auctions’ Category

How Do I Buy a Foreclosure?

Tuesday, January 17th, 2012

I have had several clients recently ask how to purchase a foreclosure property, and it is a great question. Oftentimes buyers do not differentiate between the purchase of a foreclosure, a pre-foreclosure, and a post-foreclosure. Let’s take a look at the different ways to purchase property in various stages of foreclosure:

1. Auction (the one true way to “buy a foreclosure”). If you want to buy a foreclosure this is the typical way to do so. Auctions are definitely tricky and you need to understand the process and what you may be getting into. There are several things you really need to understand before going to auction – for explanation read this article. I usually do not recommend auctions to my clients, as there are some caveats (oftentimes you cannot inspect the property first, you do not receive any disclosures, you may be bidding against experienced auction-goers, etc.) If you do decide to go to an auction make sure you are well prepared.

2. Short sales (aka pre-foreclosures). A large percentage of foreclosure-related sales are sold via short sales or lender owned listings. Purchasing a short sale can be a good way to get a better price on a home, but the buyer has to have no aversion to waiting to close escrow – sometimes as long as 3-6 months. The good thing about a short sale is that you will get to inspect the property, and usually you will be provided with disclosures from the owner. For more information on short sales and how they work, you can visit the short sale information tab on my website. I have also written numerous blogs about short sales.

3. Lender-owned/REO (aka post-foreclosures). REO (real estate owned) properties are those that are owned by the lenders who hold the note. They have already gone through the foreclosure process and are now active in the market. Most often, these properties are priced below comparable sold homes, and often the price is reduced every so often if the property has not sold. Post foreclosure properties can also be owned by “flippers,” who purchased the property at auction, did some work, and are reselling it for profit.

The good news then is that many of these homes can be purchased at a savings. The not so good news is that buyers will not likely receive disclosures, as the bank obviously never lived in the property. However, the purchase process is like that of a normal sale – buyers are able to view the property, obtain inspections and reports, and exercise due diligence to their satisfaction with the property condition.

What about all those foreclosure websites? Foreclosure websites can be helpful, but honestly if you have an experienced agent s/he can do the research for you, saving you money in subscriptions. If you are focusing on a particular neighborhood, your agent can research the neighborhood via the public records, and find out who is delinquent, and which properties have notices of default or auction dates filed. If the property is not yet listed as a short sale your agent can see if the owner is open to doing so, allowing you to write an offer and have it presented to the bank. You can also find out auction dates (which often get postponed – the new dates do not necessarily list on the public records, but your agent can do further research). If you are a skilled auction attendee and purchase a lot of foreclosed properties this way, subscribing to one of these sites is a good idea.

There is no magic bullet that will get you a screaming deal on any of these properties. But if you do your homework you can likely acquire nice home at a savings. If you are not afraid of the challenge these can all be great ways to buy your next home. Make sure you have an experienced agent to help you if you are buying a short sale or REO property. If you have any questions about foreclosure please do not hesitate to post them in the comment section below, or email me at Rachel@LaMarRealEstate.org.

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Weekly News REcap: 11-21-11

Monday, November 21st, 2011

Happy Thanksgiving week, everyone! Here is some of the recent news in the real estate market.

More homes hitting the auction block. Auctions have been around a long time, but it seems more homes are now using this service to sell quicker, including higher end homes. There are arguments on both sides of the auction equation to consider. On the one hand, if you have a home that is not selling, or if you need to sell quickly, it could be a way to stimulate interest because the opening bid is much lower than comparable sales. It definitely creates the sense of urgency that is not present in the current market. The goal of course is to obtain multiple bids, leading to a higher sales price. Auction companies also claim to reach a wider pool of buyers.

On the other side of the coin, if the home doesn’t sell the listing history will show the drastically reduced price, which some homeowners feel will have consequences when they place their home back on the market. Either way, it is a great opportunity for buyers to get a great deal, and for sellers to possibly sell their homes faster. But the jury is out on the benefits to sellers…what do you think?

Unpaid mortgages in the U.S. fall to lowest level since 2008. Although their recent study shows just under 6,300,000 delinquent mortgages in the U.S., Lender Processing Services claims that this number has been steadily declining for the past two years. Loss mitigation services are apparently chipping away at this number, but with the potential for more to come will we ever truly see a return to affordable homeownership? With the foreclosure rate growing (and no end in sight), this remains to be seen.

Home price declines good news for buyers. The latest study by Fitch claims that home prices fell 7 percent this year, and will continue to do so. In fact, the prediction is that prices will drop another 13%. This may not sound so good, but it is great news for buyers. Price drops allow buyers to purchase in neighborhoods they likely would not have been able to afford a few years ago. With the number of distressed properties it also makes it a great time to be a buyer or investor.

Existing home sales rise in October. The good news is that existing home sales rose 1.4% in October to 4.97M, according to the National Association of Realtors. This number is above the 4.85M expected, and higher than the September number of 4.91M. Although this number is below the 6 million number that is associated with a healthy housing market, the signs are still good. So no matter how much negative real estate news you hear out there, there are still people out there buying and selling homes. If you are planning to do either, it is so important to work with a skilled agent.

 

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What You Need to Know When Buying Property at Auction

Thursday, February 10th, 2011

Trustee auctions have become popular in many areas due to the large number of foreclosure properties. It used to be that no one but the lender who holds the note showed up at the auction, but nowadays many investors and buyers are doing so. It can be a great way to get a good deal on a home, but there are some caveats of which you need to be aware before doing so.

Know the neighborhood and comparable sold properties therein. You need to do your homework on the value of the home. Make sure the property is not in a neighborhood where there are numerous foreclosures, as that is an indication that values may still be falling.

Get title reports and any other reports. It is imperative that you get a title report. Unlike a traditional sale where the buyer cannot close escrow without a title company guarantee of clear title, it is up to you to make sure the property is free of liens and encumbrances. Contact a title company well in advance of auction.

Inspect if possible. In many instances you are not able to access the property, nor have a home inspection. This is perhaps one of the biggest problems with purchasing at auction. Many skilled investors, who have teams of people with whom they work to rehabilitate homes, can assess from a drive by and peek through the windows what type of work will need to be completed, since they do this often. If you are a first time home buyer or new to auctions it is advisable to proceed with extreme caution if you are unable to enter a home and have an inspection.

Learn about auction procedure and local/state law. Try to learn as much as you can about procedure before attending an auction–this includes state laws on foreclosures and the bidding process (which can vary). There are some resources online and you can also speak with investors who are familiar with the process. Many lenders have websites detailing the process. State laws on foreclosures are a good place to start. The best advice is to attend an auction as an observer beforehand to see how the process goes.

Bring multiple checks and necessary documentation. In a trustee auction you need to have the entire purchase amount with you. Often you may need to increase your bid, so you will need to have multiple checks. Keep in mind the checks have to be bank checks, not personal checks, so you have to come prepared. Check the auctioning lender’s website to find out specifically what else you will need to bring with you on auction day–do your homework and come prepared.

Be prepared for scheduling conflicts. Many properties are assigned an auction date but then rescheduled. I know of people who had all their checks and documentation ready, only to learn at the last minute that the auction was canceled. Make sure to check with the lender for daily updates on the status of the property.

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