“We buy foreclosures in San Diego”

[powayseller]

Is this a new trend, or what? I keep seeing little yellow signs advertising that an investor is looking to buy foreclosed properties, and in yesterday’s Poway Chieftain there was an ad from We Buy Homes in 1 Day. If I were a RE investor, wouldn’t I be better off waiting another year? Why would someone want to buy a foreclosure at the top of the biggest housing bubble in SD history? How will they make money at this?

[barnaby33]

If you buy anything cheap enough you can make a profit, even in a descending market.

Josh

[an]

I think there’s still money to be made even on a falling market if the deal was right. Imagine, if you can buy a foreclosed house for 30-40% under market, then turn back and sell it at 5-15% less than market, you house will probably get sold pretty quickly.

[powayseller]

Foreclosure auctions don’t give you much of a bargain, and excited investors can overbid a property. Check commercial banker’s post from a few weeks back. They also don’t get the disclosures and inspection report. The late-night informercials and books have turned daytraders into foreclosure bargain hunters, and I doubt there are any good deals at auction. In 2-3 years, when banks own the house, maybe you can get a discount. There is no easy money to be made. If anyone could really buy a house at 30% off appraised value, there would be more people doing that, driving up the auction price. The County Assessor rented a larger hall for last week’s annual lien auction, bec. so many more investors now come to them. If anyone has proof of getting a house at auction below appraised value, only then will I believe it.

Check out this from realestate.msn.com, I don’t know the date:

In the months ahead, analysts expect delinquencies to rise, putting a greater number of these foreclosures on the market for buyers to choose from. That’s bad news for owners who live in these areas, analysts say, because rising foreclosure rates typically mean falling home prices.

But it’s good news for buyers looking for some relief from the high prices of the last several years. In addition to driving neighboring home values down, foreclosures themselves tend to sell at a discount to the market, said Rick Sharga, vice president of marketing for RealtyTrac. Typically, Sharga says, buyers can shave 10% to 30% off the market price with a foreclosed home, depending on demand.

The best deals can usually be negotiated with an owner, when a property is in default, but hasn’t been put up for auction or turned over to the bank.

“Sometimes you can negotiate both ends, with the property owner and the bank,” Sharga said.

Risky business
But foreclosures don’t always mean bargain-basement prices.

“In a hot real estate market, I have seen properties sold out of foreclosure for more than the estimated market value,” Sharga said.

And there are more drawbacks and risks to buying property at auction. First of all, most buyers will need to come up with 100% of the purchase price on the day following the auction. Second, many times a property can’t be fully inspected, and in some states, the previous owner has the right to buy it back for what you paid within a certain period.

“Like any other investment, the higher the reward, the higher the level of risk,” Sharga said.

[an]

I agree that there are risks. You have to know what you’re doing when buying foreclosures, or else, you’ll be caught holding the bag. But you can find deals out there, such as preforeclosure and such. Also, not everyone can buy foreclosure, you need the cash on hand to buy those. So the demand is limited. Especially, in a down market, there would be even less people bidding. The pro who bid will probably take the market condition into consideration and bid accordingly. So foreclosure auction might not be a good deal in a up market, in a down market, you might be able to to find better deals.

[Jim Brubaker]

I think we are all thinking back a couple of years before the bubble.

A house in foreclosure today is going to be given to the first trust deed holder, while at the same time the second drops off. Nobody is going to bid. Now if the owner had any equity, the bank is going to market the unit lowering the price until it either sells, or the owners equity spread is zero. When it gets to zero, the bank, depending on how many units of inventory they have on hand might ask for bids to clear out the inventory.

Now a VA loan that forecloses will be returned by the bank to the VA. I’m not sure but I believe that the bank will get a full reimbursement. Somehow I seem to remember that the VA insures the first 20% of the banks loan against a loss. And on VA repo’s –high bid wins-if you can fog a mirror, this is a good one to jump on.

I can’t really be certain, but these people claiming to buying foreclosures, might be doing things a little more different than you think. The people they are talking to are desperate. I’ve read where for a fee, they would show the homeowner ways to stall the foreclosure and walk away with a couple of grand in their pocket. At this point,if it didn’t work out for the homeowner, he was now in even less of a position to take legal recourse.

[picpoule]

You don’t buy at an auction. There’s no bargains there. You have to buy before the auction, negotiating with the bank to take on any loan payments in arrears, interest, penalties, etc. to reinstate the loan and negotiate with the seller to pay him for his equity. Preforeclosure dealing like this is complicated, full of headachees, requires a LOT of work AND a seller who still has some equity and hopefully no liens, etc. on the notice of default property. Sellers in this position are hard to find. I think if an investor is interested in preforeclosures, though, now is a good time to do it before there are too many foreclosures hitting the market — and too much competition from other investors looking for the same type of deal.

[powayseller]

Picpoule – can you explain more about preforeclosures and the process? Why would people in preforeclosure not even have their home listed for sale? I saw several like this in RealtyTrac.com. Why are auctions and foreclosures so “hyped”? I have heard there are late night infomercials and books on this topic. What happens to the seller who doesn’t have equity?

[Jim Brubaker]

When rents = monthly mortgage payment, preforeclosures make sense. You take over the persons bank loan and if you are lucky, rent it back to him and you don’t have to pay a Realtor a dime. Plus you can have the worlds worst credit rating and not have to put anything down.

In this market, the only thing that you can compare buying preforeclosures to, is sliding down the sharp edge of a razor blade. Painful to say the least.

[picpoule]

When you get behind on your mortgage payments, in California, the lender will file a notice of default. After this, it takes a few months for the auction notice to go out. At this point, some owners may list the property for sale. Many owners are in denial about what’s happening to them, however, and/or want to try to try to save their property, get loans from their family, take out a second or try other measures. I’m sure that there are realtors who go after the properties in the notice of default stage, too. But there’s a short window of time (4-5 months) between when the notice of default is filed and the auction notice is filed and the seller may not be able to sell his house in time.

A seller may not have equity for several reasons. We all know why this could be. Also, the property may be mortgaged to the hilt, and/or it may have IRS, property tax, mechanics’ or judgment liens, filed on it. For the owner in this situation, he may be able to get out from under with a short sale, if the lender approves. But a preforeclosure investor will stay away from anyone with their equity swallowed up by encumbrances. The property will then be put on the auction block, or if no one bids on it, becomes a REO.

There’s so much hype about foreclosure auctions and buying REO because people make a lot of money hawking their seminars and books on the subject. If you’re interested in finding out more about the preforeclosure process, you can read a book by Thomas Lucier. I can’t recall the name. It’s very thorough, does not promise instant riches, and informs the reader of all the hard work required for this type of investing.

[powayseller]

This morning at the San Diego Courthouse on Broadway, an auctioneer was auctioning off properties, outside off the court steps. About a dozen people were gathered around, and most were very shabbily dressed. It was an odd sight! I stopped to listen, and caught only the last sale, which he called at $212K, 3 times, and no one stepped forward. He then said it would go back to the bank, and the event ended. I stopped one of the tooth-less gals standing around him, and she told me it was an auction for houses in foreclosure. She was untalkative, and quickly walked away, almost as if she thought if I got too interested, I might start coming there too and be her competition on bidding.

I called the courthouse, but got nowhere w/ the numbers they gave me. Typical, right?

What I really wanted to know is why these people allowed their homes to go to auction, instead of just selling them, and second, if the number of homes auctioned is changing.

[Anonymous]

I sat thru a Learning Annex class on this given by RE lawyer. He had nothing to sell, everything was in the notes ($10 additional) and was very clear on each step. In California there is a lot of steps to keep it clean and legal, otherwise you can get burnt. This class I took was during the peak of RE about 2 years ago, he mention to wait a few years until the inventory is bulging at auction, people are walking away from there homes and lenders want to sale.

I like to here from anybody if they been to any recent auctions, now promoted on the radio.

IMHO – Be knowledge and use a RE lawyer (familiar in this area) for paperwork before jumping in so you can learn the ropes safely.

mgl

[Anonymous]

I sat thru a Learning Annex class on this given by RE lawyer. He had nothing to sell, everything was in the notes ($10 additional) and was very clear on each step. In California there is a lot of steps to keep it clean and legal, otherwise you can get burnt. This class I took was during the peak of RE about 2 years ago, he mention to wait a few years until the inventory is bulging at auction, people are walking away from there homes and lenders want to sale.

I like to here from anybody if they been to any recent auctions, now promoted on the radio.

IMHO – Be knowledge and use a RE lawyer (familiar in this area) for paperwork before jumping in so you can learn the ropes safely.

mgl

[Anonymous]

I sat thru a Learning Annex class on this given by RE lawyer. He had nothing to sell, everything was in the notes ($10 additional) and was very clear on each step. In California there is a lot of steps to keep it clean and legal, otherwise you can get burnt. This class I took was during the peak of RE about 2 years ago, he mention to wait a few years until the inventory is bulging at auction, people are walking away from there homes and lenders want to sale.

I like to here from anybody if they been to any recent auctions, now promoted on the radio.

IMHO – Be knowledge and use a RE lawyer (familiar in this area) for paperwork before jumping in so you can learn the ropes safely.

mgl

[Anonymous]

I sat thru a Learning Annex class on this given by RE lawyer. He had nothing to sell, everything was in the notes ($10 additional) and was very clear on each step. In California there is a lot of steps to keep it clean and legal, otherwise you can get burnt. This class I took was during the peak of RE about 2 years ago, he mention to wait a few years until the inventory is bulging at auction, people are walking away from there homes and lenders want to sale.

I like to here from anybody if they been to any recent auctions, now promoted on the radio.

IMHO – Be knowledge and use a RE lawyer (familiar in this area) for paperwork before jumping in so you can learn the ropes safely.

mgl

[Author]

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