Are Foreclosures Bargains?
June 13, 2007
The media headlines concerning the increased number of foreclosures has created a similar increase in the number of inquiries that we are receiving from customers about purchasing a property that is in foreclosure. The assumption is that foreclosure properties can be obtained at bargain basement prices. I believe that this assumption is based on some past history of foreclosure sales.
Early on in my real estate career, I attended several sales on the court house steps. Most often there were no bidders and the lender, who always has the first bid, would get the property back for the amount owing the lender plus costs of the foreclosure process. I even once had a client who authorized me to bid on a property for him. He gave me a certified bank check in the amount of sale that had been published plus several $1000 certified checks to increase his bid if necessary. I called the trustee handling the sale in the morning of the sale and was told it was still scheduled that morning on the court house steps. However, when the time came the trustee at the courthouse announced that the sale had been canceled. I subsequently learned that the lender and the owner and a buyer had worked out a curing of the debt.
Most of the properties under threat of foreclosure (Notices of Default) are listed and sold through the MLS. Some as short sales and some at prices which cover all the indebtedness. Those that actually end up as sales on the court house steps are usually not bargains as the indebtedness against the property is greater than the current market value. These properties then go into the lenders or HUD or Fannie Mae, Freddie Mac inventory as REOs. When these entities put the property back on the market, they will usually try to recoup their monies, thus the properties remain competetive with other properties being offered for sale; i.e. no real bargain.
Tomorrow, I will explain the laws that govern offers made on properties on which a Notice of Default has been filed.
The media headlines concerning the increased number of foreclosures has created a similar increase in the number of inquiries that we are receiving from customers about purchasing a property that is in foreclosure. The assumption is that foreclosure properties can be obtained at bargain basement prices. I believe that this assumption is based on some past history of foreclosure sales.
Early on in my real estate career, I attended several sales on the court house steps. Most often there were no bidders and the lender, who always has the first bid, would get the property back for the amount owing the lender plus costs of the foreclosure process. I even once had a client who authorized me to bid on a property for him. He gave me a certified bank check in the amount of sale that had been published plus several $1000 certified checks to increase his bid if necessary. I called the trustee handling the sale in the morning of the sale and was told it was still scheduled that morning on the court house steps. However, when the time came the trustee at the courthouse announced that the sale had been canceled. I subsequently learned that the lender and the owner and a buyer had worked out a curing of the debt.
Most of the properties under threat of foreclosure (Notices of Default) are listed and sold through the MLS. Some as short sales and some at prices which cover all the indebtedness. Those that actually end up as sales on the court house steps are usually not bargains as the indebtedness against the property is greater than the current market value. These properties then go into the lenders or HUD or Fannie Mae, Freddie Mac inventory as REOs. When these entities put the property back on the market, they will usually try to recoup their monies, thus the properties remain competetive with other properties being offered for sale; i.e. no real bargain.
Tomorrow, I will explain the laws that govern offers made on properties on which a Notice of Default has been filed.
posted by shirley harry at 8:54 AM
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