A few weeks ago, I wrote a blog entry on the basics of the foreclosure process. With so much in the media about foreclosures almost every day, people have a lot of questions about foreclosures and how they work.
In addition to sharing this information, I would also like to help put an end to the rumors that buying foreclosures is an easy way to make money and get deals in real estate. It is possible to get deals and make money, but it is definitely not EASY, and there are many many pitfalls to watch out for.
I worked in foreclosures for about seven years throughout the 1990s, so let me share some tips and information from my experiences.
First, there are not that many foreclosures in the more desirable neighborhoods of Oakland and Berkeley. In fact, most of the East Bay foreclosures are in cities like Antioch and East Oakland, so finding a foreclosure that you might like will be difficult from the get go.
Second, buying foreclosures on the courthouse steps can be a tricky business. First, the bank wants to get their money back, so the opening bids may not be as low as you would hope. They will also require buyers with all cash. Plus, there are some very experienced players there who know how to game the system to their advantage. Buyer beware!
Third, it is very, very difficult to know the condition of the house in foreclosure that you are buying, since you probably won't be able to go inside before you buy it. It could be a neglected property in disrepair, or the person losing his or her home might be upset and cause intentional damage. Also, make sure you know exactly which deed of trust you are buying.
If you are looking for deals in foreclosures, it is probably best to wait until the bank has to sell it on the open market. At that point, the banks might be willing to make a deal. After all, they are not in the homeowning business. But, bear in mind that the sales will likely be on an "as is" basis and excellent credit is necessary.
I said it before and I will say it again--foreclosures are a tricky business. If you have any questions about buying foreclosures in the East Bay, let me know. I am always happy to help.
Ready to make a move? Make a Smartt Move with Mary Smartt. The East Bay is one of the best places on earth, and I go the extra mile to help people feel at home here. www.LawtonAssociates.com
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Mary, Good points. Just like the easy market of the last seven years, some folks are thinking positively about purchasing foreclosed properties. I have not seen a steal on any foreclosure in my, almost 20 years in the business. Don't see it happening now, either. You are right, the banks want the money owed to them, some of the foreclosures here in CT are priced higher than market value;)
As a general rule most foreclosure acquired by banks come back on the market lower than the foreclosed bid... unless it is a real bargain in which case there are 97 people bidding and or there is a a senior lien out in the wings that has not been disclosed.
I have also found that there is a perception that foreclosures are great deals. It's funny to think that a bank would forego a shot at market value when they are trying to mitigate their losses. In Northern Virginia right now (particularly my neck of the woods in Prince William County), foreclosures are going very close to market value. And if they are not, they usually need a TON of repairs to get them up to the condition of the neighboring properties. We've all seen the "IF I CAN'T HAVE THIS HOUSE, NO ONE CAN," syndrome.
Buying on the open market is a royal pita, and many buyers have no idea what they're getting into when they negotiate with the lender. If they aren't dealing with an experienced reo agent, then the buyer better retain a real estate lawyer. In fact, hiring a real estate lawyer is a good idea no matter how you look at it. The reo lenders in California seem to be getting worse instead of better, despite the fact it's a buyer's market in many parts of the state.