For twenty years, amid a booming real estate market, foreclosures were a little known oddity… and then the world changed. For the past two years, investors and bargain-hunting homebuyers have looked at foreclosed property as a primary source for acquisitions. But despite the large number of foreclosure transactions, many buyers are still taking a “hit or miss” approach to finding and buying these properties.
The knowledgeable buyer knows that there are basically three ways to buy a foreclosure property:
• Pre-foreclosure purchase (including short-sales),
• Purchase at the Foreclosure Sale, and
• Post-foreclosure Purchase.
Pre-Foreclosure Purchase
In California, two key events must occur before a property can be sold at foreclosure:
• Notice of Default must be recorded and provided to the property owner/borrower.
• Notice of Trustee Sale must be recorded and provided to the owner/borrower. This second notice cannot be recorded until 3 months after the Notice of Default. The Foreclosure Sale may happen as soon as 20 days after the Notice of Trustee Sale is presented.
This means that a buyer has about 110 days to identify and buy a “Pre-foreclosure” property.
This is a particularly advantageous time to buy for several reasons:
• The price may be lower than after the foreclosure sale,
• The property is probably in better condition than after the foreclosure sale, and
• There is little competition for the property at this point.
However, identifying the pre-foreclosure property can be difficult. Many successful buyers pursue several concurrent “search” strategies:
• They advertise their desire to buy “distressed” properties,
• They use a referral network of individuals who might be aware that an owner is having problems, and
• They contact owners of empty, run-down properties as this often indicates a looming foreclosure.
The purchase process itself is usually conducted following the standard home-buying procedures, and is therefore, very low risk to the buyer.
All things considered this is probably the BEST way to buy foreclosure properties.
Purchase at the Foreclosure Sale
Purchasing at the Foreclosure Sale is probably the Least attractive, most risky approach to buying foreclosure properties. There are several issues with this approach:
• The buyer acquires the property with NO warranty on condition or habitability… none!
• The buyer acquires the property with NO warranty on title… none!
• The buyer has no financing qualification contingency protection.
• The buyer has little or no opportunity to inspect or perhaps even tour the property.
• There are lots of competitors for desirable properties.
All in all, this approach provides high risk and questionable return.
Post-foreclosure Purchase
At the foreclosure auction, one of three things typically occurs:
• The property is sold to a user (someone who will occupy or rent-out the house), or
• The property is sold to the bank (lender), or
• The property is sold to a wholesaler (flipper).
If the property is sold to a user, then as a buyer, it is usually no longer available to you.
But often it is sold to the lender. Here’s how this happens… almost always, the lender places the opening bid. This opening bid is often the amount of indebtedness. If no other bids are placed, then the lender buys the property. As a buyer, this is not necessarily bad for you, because the lender will almost certainly place the property on the market, usually through a local real estate broker. Have you ever driven down the street and seen a ReMax sign with a “Foreclosure” banner pasted across the front? That home is not really in foreclosure… it is a lender owned property and the lender is trying to sell it back into the market. In the industry, these properties are often referred to as “REO properties”… REO means “Real Estate Owned”… the name of the balance sheet account where the lender is carrying this particular asset.
In better days, these properties were often sold at near-market prices but now, lenders are desperate to move this inventory and so good deals are not rare. In addition, the risk of this type of purchase is probably no greater than the risk of buying any traditional property.
If a “wholesaler” (a flipper) buys the property, it will almost certainly be back on the market within 90 days. Although the price may be slightly below market, you are less likely to find a “great deal” when dealing with a wholesaler.
In summary, Pre-foreclosure and Post-foreclosure REOs usually offer the best opportunities to buy; but regardless of how you buy your foreclosure property, Raintree Financial is experienced and prepared to help you finance and close the transaction; safely, securely, and profitably. Just fill out the “Quick Quote” form… you’ll be glad you did.
For twenty years, amid a booming real estate market, foreclosures were a little known oddity… and then the world changed. For the past two years, investors and bargain-hunting homebuyers have looked at foreclosed property as a primary source for acquisitions. But despite the large number of foreclosure transactions, many buyers are still taking a “hit or miss” approach to finding and buying these properties.
The knowledgeable buyer knows that there are basically three ways to buy a foreclosure property:
• Pre-foreclosure purchase (including short-sales),
• Purchase at the Foreclosure Sale, and
• Post-foreclosure Purchase.
Pre-Foreclosure Purchase
In California, two key events must occur before a property can be sold at foreclosure:
• Notice of Default must be recorded and provided to the property owner/borrower.
• Notice of Trustee Sale must be recorded and provided to the owner/borrower. This second notice cannot be recorded until 3 months after the Notice of Default. The Foreclosure Sale may happen as soon as 20 days after the Notice of Trustee Sale is presented.
This means that a buyer has about 110 days to identify and buy a “Pre-foreclosure” property.
This is a particularly advantageous time to buy for several reasons:
• The price may be lower than after the foreclosure sale,
• The property is probably in better condition than after the foreclosure sale, and
• There is little competition for the property at this point.
However, identifying the pre-foreclosure property can be difficult. Many successful buyers pursue several concurrent “search” strategies:
• They advertise their desire to buy “distressed” properties,
• They use a referral network of individuals who might be aware that an owner is having problems, and
• They contact owners of empty, run-down properties as this often indicates a looming foreclosure.
The purchase process itself is usually conducted following the standard home-buying procedures, and is therefore, very low risk to the buyer.
All things considered this is probably the BEST way to buy foreclosure properties.
Purchase at the Foreclosure Sale
Purchasing at the Foreclosure Sale is probably the Least attractive, most risky approach to buying foreclosure properties. There are several issues with this approach:
• The buyer acquires the property with NO warranty on condition or habitability… none!
• The buyer acquires the property with NO warranty on title… none!
• The buyer has no financing qualification contingency protection.
• The buyer has little or no opportunity to inspect or perhaps even tour the property.
• There are lots of competitors for desirable properties.
All in all, this approach provides high risk and questionable return.
Post-foreclosure Purchase
At the foreclosure auction, one of three things typically occurs:
• The property is sold to a user (someone who will occupy or rent-out the house), or
• The property is sold to the bank (lender), or
• The property is sold to a wholesaler (flipper).
If the property is sold to a user, then as a buyer, it is usually no longer available to you.
But often it is sold to the lender. Here’s how this happens… almost always, the lender places the opening bid. This opening bid is often the amount of indebtedness. If no other bids are placed, then the lender buys the property. As a buyer, this is not necessarily bad for you, because the lender will almost certainly place the property on the market, usually through a local real estate broker. Have you ever driven down the street and seen a ReMax sign with a “Foreclosure” banner pasted across the front? That home is not really in foreclosure… it is a lender owned property and the lender is trying to sell it back into the market. In the industry, these properties are often referred to as “REO properties”… REO means “Real Estate Owned”… the name of the balance sheet account where the lender is carrying this particular asset.
In better days, these properties were often sold at near-market prices but now, lenders are desperate to move this inventory and so good deals are not rare. In addition, the risk of this type of purchase is probably no greater than the risk of buying any traditional property.
If a “wholesaler” (a flipper) buys the property, it will almost certainly be back on the market within 90 days. Although the price may be slightly below market, you are less likely to find a “great deal” when dealing with a wholesaler.
In summary, Pre-foreclosure and Post-foreclosure REOs usually offer the best opportunities to buy; but regardless of how you buy your foreclosure property, Raintree Financial is experienced and prepared to help you finance and close the transaction; safely, securely, and profitably. Just fill out the “Quick Quote” form… you’ll be glad you did.