July 18, 2006 at 1:50 PM #6920SD RealtorParticipant
So I have gotten a few emails (that were really nice, thank you guys), and waiting hawk had a very inciteful response in a previous posting about foreclosures and how buyers can REALLY save money by purchasing distressed property.
As many of us tout patience in this current cycle, the popular question is, what can I do while we wait?
Well, learning about foreclosures and distressed properties is probably the single best thing you can do. This education, if practiced correctly could enable you to get a great deal on a home, without any Realtors involved at all. There are lots of books out there.
This post gives a VERY informal discussion that is most likely going to be frought with errors and personal observations. Fortunately those with better background on this stuff will correct me where I err….
So lets say Joe homeowner falls behind on his mortgage. (First off, if you ever are in a bind and cannot make a payment then GO TALK TO YOUR LENDER. Running and hiding or ignoring it is the WORST THING you can do.)
Anyways eventually the lender will file a notice of default. This is the first step in the foreclosure process. Notices of default are recorded and published for public record. You can find them in the San Diego Business Examiner (someone correct me if I am wrong on that name) and other places. There are plenty of services like Realtytrac that will also send you updated notices of default as well for a small fee. I just represented the buyer in a purchase of his San Marcos home that was found through Realtytrac.
Now just because it goes into NOD status doesn’t mean it will foreclose. However it is on its way. If it does make it all the way to foreclosure it will go to auction. The auctions are public and you can actually go and bid on a home!
PLEASE UNDERSTAND. The explanation above is VERY SIMPLIFIED and I missed several details. The bottom line is you can learn about this stuff and I encourage it. Learning about it is not an overnight deal. Take the time, do it right.
– I have tracked many homes that go from NOD status and NEVER make it to foreclosure. Why? Well there are MANY professionals out there who prey on homeowners that are in distress. They will purchase the home before it gets foreclosed.
– One thing that I believe MANY will agree on is that this is an insiders game. I am a Realtor and I am very much on the outside looking in. Many guys who work in the REO departments of banks and lenders snap up these properties or tell friends or syndicates of investors and those properties are gone.
– Okay so lets say a property DOES make it all the way to auction and didn’t get snagged by the insiders. Do your research!!! Get a title search done on that property and make sure there are no other liens on it. Go look at it and kick the tires. Make sure it is not a candidate for condemnation or imminent domain or some wierd environmental issue. Just do your research.
– Don’t be afraid to go attend a few auctions and just watch them in action. Learn about this stuff the right way. Track some properties that go from Notice of Default status, all the way to auction and see what they go for. Get a feel for how it all works.
– I have not discussed Tax Liens and those auctions but that is another discussion for another post.
So the bottom line is, while the market is changing take advantage and LEARN. You may be able to put that practice to use and put guys like me out of business but I promise I will not hold it against ya!July 18, 2006 at 2:17 PM #28742waiting hawkParticipant
My plan is:
Depending on how far the market comes down, we will buy a property (probably not in the end of cycle cause impatient wife) and put 40%-50% down. We will buy a foreclosure and not use a realtor. If the market drops even further in 4-5 years then we will gain a realtor and buy a larger home and rent out the first. I will not have raw land this time in another bubble (balloon whatever masses want to call it). Realtors are not bad and you need them on certain aspects for sure. I will use one on a second property due to better negotiation because I don’t think our second home will be a foreclosure. I WILL always use one to sell. When I sold my property, I would’ve NEVER sold it on my own. My realtor form Century 21 T/C found one buyer. ONLY ONE even called btw after 30% price drop selling for 50% less than 20 parcels away. Selling I believe they are needed the most (that’s my view of course). Pays to have one on the selling side because who else would sit in an open house all day reading a book for free or deal with low ball buyers 🙂 (not me)
If market does not drop far then we will just buy and pay the one place off within 5-8 years and not sell at a later bubble. I just can’t stand owing anyone $1.00July 19, 2006 at 9:52 AM #28838powaysellerParticipant
Foreclosures are very competitive now: lots of other buyers out there, due to the RE boom and lots of books/seminars/TV infomercials. This causes the price to be bid up very high.
Second, you can’t do a home inspection, so you don’t know if the foundation is cracked, mold is in walls, etc. That is too risky for me.
Third, by the time the seller is in foreclosure, they may have trashed the place, torn out light fixtures, who knows what?
Does anyone have any foreclosure success stories, because all I hear are the disadvantages. My landlord is a real estate investor since he started buying SD foreclosures in the last downturn, and he told me to stay away from foreclosures. He is not buying RE in other states.
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