So You Want to Buy A Foreclosure Property

June 5, 2008

As real estate agents in the present real estate marketplace, we frequently receive calls from our clients wanting to purchase properties that are either already bank-owned or properties that are in some stage of foreclosure. One has only to read the daily newspaper to see the columns and columns of notices of trustees' sales. The question is "Are these good deals or not?"

First: to purchase a property on the court house steps, a potential bidder must have the total purchase price in cash or in a bank cashier's check. The lender gets the first bid which is generally the amount owed to that lender. Sometimes the lender who is foreclosing is not the only lien holder on the property. If one buys it, one also buys any senior liens. It is a must to order a preliminary title report from a reputable title company.

Then: Once a lender has received title to a property in a foreclosure sale, the lender will do the necessary paperwork required to offer the property for resale. This can take several months. Once the property is offered for resale, offers received by the bank must be scrutinized and this also can be a timely process. If the lender has priced the property under the market value, one may be competing with other buyers in a multiple offer situation. It is not like dealing with an owner/seller who will respond in a timely manner. The lender's asset management department has employees who are assigned to files and who have procedures to follow. (These employees do not have a vested interest in getting the property sold quickly.)

Patience is the virtue that buyers of foreclosure properties must have. Often buyers become disenchanted due to the long delays between making their offer and knowing whether the offer has been accepted by the lender.