Foreclosures

The Foreclosure process begins when a homeowner fails to make payments on the mortgage at the specified time.

Foreclosure proceedings typically start with a formal demand for payment, which is usually a letter issued from the lender. This letter of notice is referred to as a “Notice of Default”. In most states, a foreclosure notice must be published in the "legal notices" section of a local newspaper where the property is located or in the nearest city. Also, foreclosure notices are usually posted on the property itself and somewhere in the city where the sale is to take place.

Sometimes the homeowner will try to sell the property before the home goes into foreclosure. In this case the seller typically will list the home with a Realtor and the agent may note that it is a pre-foreclosure property or that it is subject to a “short sale”.

A short sale generally means the sellers are trying to sell the property for less than what is owed on the mortgage. The lender is involved with a sale like this and will have to agree to any offers the seller receives on the home. Typically this is done to help the seller get a quick sale prior to the lender foreclosing on the property. The lender will most likely work with the seller on a sale prior to foreclosure. They would rather sell the property vs paying the costs associated with foreclosing on it.

If the owner fails to pay up or doesnt get the property sold, a trustee sale is held, and the property is sold to the highest bidder at an auction.

In a trustee sale, the lender who holds the first loan on the property starts the bidding at the amount of the loan being foreclosed.

Trustee sales are advertised in advance and require an all-cash bid. Note: These are not “listed” properties. Trustee sales are generally held at the County City Building in which the property is located. A sheriff, a constable or lawyer acting as trustee usually conducts the sale.

Buying a foreclosure property can be risky, especially for the novice. Usually, you buy a foreclosure property "as is," which means that there is no warranty implied for the condition of the property. There is no financing; a bidder must show cash or a cashiers check at time of bid. The property's condition is not well known and an interior inspection of the property may not be possible before the sale.

It is also important to be sure that any liens, undisclosed mortgages or court judgments are cleared or at least disclosed.

If a foreclosed property was not successfully sold at auction, the lender takes it back and it becomes a bank owned property (See the bank never owns the property they only own the mortgage).

Bank Owned Properties

(The industry term for a bank owned property is REO. Real Estate Owned)

The bank now owns the property and the mortgage loan no longer exists.

The bank then will usually sell the home through a real estate agent and price it according to the market and condition.

From the lender's point of view, bank owned properties are non-performing assets that do not generate income.

If the foreclosed property can be sold to release cash to invest, then this is the main motive for the bank; sell the property and invest the cash.

Each bank works a little differently, but they all have similar goals. They want to get the best price possible and have no interest in "dumping" real estate cheaply.

So just be aware that the fact a bank is trying to sell its property does not necessarily mean that they are going to sell it at a bargain price. Nor do they know anything about the property and typically sell it “as-is”.  

Just make sure you do your research on the property before you commit to any contracts.

If your interested in getting a list of Bank owned properties. Please contact me with your requests.