We have spent significant time familiarizing ourselves with the foreclosure market in order to provide excellent representation for buyers.  Surprisingly, most of the properties in foreclosure are in good condition with only minor cosmetic repairs necessary.  

The biggest benefits to purchasing bank owned properties, other than the extremely favorable price tags, come when escrow is opened.  Buyers have the right to a preliminary title search to detect any clouds on the title. If the title search reveals any irregularities, the Seller (bank) will normally clear these issues up prior to close of escrow. If not, the buyer has the right to back out of the purchase. During the escrow period, buyers also have the right to an appraisal which substantiates value. Another protection offered to a buyer is the fact that they, in most cases, have the right to perform inspections of the property. Banks most often do not do repairs and offer these properties “As Is” but at least the buyer has knowledge of what he is getting into and, if there are significant repairs noted, can rescind his offer to purchase or negotiate with the bank to come to a compromise.

Bank owned properties offer great pricing and buyers can feel confident about their purchase knowing all of the necessary precautions have been taken.  Protecting you is our main concern when representing you in the purchase of property.

 

What is Foreclosure?

Foreclosure is a process that allows a lender to recover the amount owed on a defaulted loan by selling or taking ownership (repossession) of the property securing the loan. The foreclosure process begins when a borrower/owner defaults on loan payments (usually mortgage payments) and the lender files a public default notice, called a Notice of Default or Lis Pendens. The foreclosure process can end one of four ways:

  1. The borrower/owner reinstates the loan by paying off the default amount during a grace period determined by state law. This grace period is also known as pre-foreclosure.
  2. The borrower/owner sells the property to a third party during the pre-foreclosure period. The sale allows the borrower/owner to pay off the loan and avoid having a foreclosure on his or her credit history.
  3. A third party buys the property at a public auction at the end of the pre-foreclosure period.
  4. The lender takes ownership of the property, usually with the intent to re-sell it on the open market. The lender can take ownership either through an agreement with the borrower/owner during pre-foreclosure, via a short sale foreclosure or by buying back the property at the public auction. Properties repossessed by the lender are also known as bank-owned or REO properties (Real Estate Owned by the lender).

This foreclosure process allows for three opportunities for finding bargains on foreclosure homes.

Pre-Foreclosure (NOD, LIS):

Buying a property in pre-foreclosure involves approaching the borrower/owner and offering to buy the property outright. The borrower/owner can walk away with something to show for any equity in the property and avoid a bad mark on his or her credit history. The buyer has time to research the title and condition of the property and can realize discounts of 20-40 percent below market value.


Wondering what happens after foreclosure? Then please read on. Remember that understanding foreclosures is the first step for homeowners to stop foreclosure. It is also the first step for investors to buy foreclosure properties.

Auction (NTS, NFS):

If the loan is not reinstated by the end of the pre-foreclosure period, potential buyers can bid on the property at a public auction. Buyers often are required to pay in cash at the auction and may not have much time to research the title and condition of the property beforehand.

Bank-owned (REO):

If the lender takes ownership of the property, either through an agreement with the owner during pre-foreclosure or at the public auction, the lender will usually want to re-sell the property to recover the unpaid loan amount. The lender will then typically clear the title and perform needed maintenance and repair. Bank foreclosures can become government foreclosures if the loan is backed by a government agency such as the Department of Housing and Urban Development (HUD) or the Department of Veterans Affairs (VA). In that case the government agency would be responsible for selling the property.



Timeline for Foreclosure