Home Foreclosures Information
Our home foreclosure information page was created so we are all speaking the same language lets start with what a foreclosure is. The dictionary states; Foreclosure: an act or instance of foreclosing specifically: a legal proceeding that bars or extinguishes a mortgagor’s right of redeeming a mortgaged estate. For this conversation, the term used in Real Estate is REO (Real Estate Owned). What this means to a homeowner is that they no longer hold legal possession and the property that they failed to make payments on can be sold without their permission.
Home buyers who want a good deal in real estate invariably think first about pursuing foreclosures. Our Foreclosure Information and Home search page offer Buyers and Sellers detailed information. Buyers have this picture in their mind of a cute little house, surrounded by a white picket fence that is owned by a widowed mom who fell on hard times, but that scenario is generally far from reality. I want to make sure you know what to expect and the upside and downside of buying an REO. See the FAQs below for more information.
Who owns the foreclosure and who will I be working with? I get that question a lot and I respond, it depends. This introduces the topics of Fannie Mae & Freddie Mac, which are the conduits for government-backed loans. Your bank, which lent you the money (mortgage) for your home rarely holds the loan (debt). Banks sell the mortgage to an investor who secures the loan and the bank services the loan. That means the bank takes the money and credits your account, but they owe the money to the investor that bought the loan. When homes go to foreclosure, the bank servicing the loan is forced to sell it (with the help of attorneys). In essence, you are buying from a bank. It could be any number of banks or a servicing company working for Fannie Mae or Freddie Mac. This is very important they are only thinking about the money and not about you! They (the bank) is now the seller and they have but one goal to make as much as they can to recover from the loss. Keep in mind every that states rules and laws are slightly different and work with an agent who is familiar with REOs in that state.
Now that you have an understanding of REOs and whom you are actually buying from, I suggest you search for a home by city, which generally is the best way, and helps you to understand the different values in an area. My search engine provides all the REOs in a given area. As the market recovers from this downturn, you may prefer to use the Search Engine on my home page www.AndersonHomePros.com which has all listings including REOs, Short Sales and Regular Sales, since REOs will decrease in number and generally require longer waits for bank approval. Regular sales may answer your needs in a more timely manner.
Questions Buyers Might Ask before Buying Bank-Owned Property From The California Association Of Realtors
There may be incredible bargains on properties that have been foreclosed and are now owned by lenders. There may also be pitfalls. This brochure may help you avoid the potential problems and make your purchase go well. Here are questions to get you off to the right start:
1. What is REO and what is the advantage to buying it?
Once a property has been foreclosed and has been taken back by the lender, the property is commonly called an REO or real estate owned by the foreclosing lender. In most cases, although not all, the REO is now owned by a bank, finance investment group, or other financial institution. The lender may not wish to continue owning the property, as it may be costly and may tie up the lender assets. REO lenders may be strongly motivated to sell and may offer bargain prices well below those of comparable properties.
2. Where can I find out about these properties?
REO property may be marketed through real estate agents, through traditional multiple listing services, or through real estate auctions, to name a few sources.
3. Is the paperwork when making an offer on REO different from other purchases?
Except for purchasing at a real estate auction, a standard-form purchase agreement may be the same as if you were purchasing property that is not REO. Auctions may use special contracts, and due to the complexities of buying at REO auctions, these types of sales are not covered in this brochure. Often banks will have a purchase addendum specific to the bank. There is also a disclosure regarding that the purchaser is aware that it is an REO.
Once your offer is submitted to an REO lender, you may receive an addendum to sign as part of the contract. This REO addendum may specify additional terms and conditions between buyer and seller. These may include an as is and where in the clause. The addendum may also state that there are no written, oral, or implied warranties. If, however, an REO lender knows of something that is wrong with the property, or is in possession of any inspection reports, they may be required to disclose this. The REO lenders addendum may also contain a provision that if the buyer does not complete the sale by the agreed date, a per diem may be charged to the buyer. The REO lender may also spell out what closing costs they will pay, and which ones the buyer will be expected to cover. Aside from the REO addendum, the REO paperwork may differ from a traditional sale in that REO lenders are exempt from certain disclosure requirements, such as a Transfer Disclosure Statement (TDS). This disclosure indicates what a seller knows about the property’s condition. The concept of the TDS is simple: an owner may have a history in the property and may be aware of problems or red flags concerning the property. In a typical REO transaction, however, the former owner has lost the property through foreclosure and is now out of the picture.
Buyers are cautioned that the REO lender may have little or no knowledge of the physical condition of the property. The lender also may not know of external or economic issues which may impact the property’s value or desirability. The REO lender may have owned the property for a very brief time since completing the foreclosure process.
4. How can I discover any potential problems with REO property I want to buy?
A buyer is encouraged to thoroughly check all aspects of a property and to hire third party inspection services to inspect the property and provide a written report. These inspections may include a Standard Structural Pest Control Report (commonly referred to as a termite report), a Home Inspection or Contractors Report, and other inspections such as roof, septic, pool, or well, to name a few. Review these reports carefully. If further inspections are recommended, consider the value of having additional inspections and estimates so you may learn as much as possible about the property and other issues concerning the property.
5. I have heard that REO properties may be in bad condition. Why is that?
The former occupant of the property, particularly if that occupant lost ownership or was evicted in the foreclosure, may have skipped routine maintenance items, ignored needed repairs, stripped appliances or fixtures, or deliberately damaged the property. Although the REO lender may subsequently have done repairs to make the property marketable, it is possible that unknown or hidden problems may surface later. It’s recommended that you have all the utilities turned on during your inspections because this may give you and your inspectors the opportunity to spot leaks, electrical malfunctions, and the like. REO lenders may not offer home warranties or guarantee the condition of the property, so know what you are buying.
6. How much of a bargain can I get if I buy an REO property?
The answer to your question depends on many factors. You may ask your REALTOR what the current trends in the marketplace are allowing. Often I find that banks are not willing or motivated to do work on the property but are willing to adjust prices since it doesn’t require the bank to contract out repairs. As the market heats up the banks have been doing less and less and are not willing to negotiate price.
Sources for REOs and Short sales are included in your standard home search on Anderson Home Pros website so a separate search is not needed. We work with Fannie Mae and Freddie Mac as well so you can be assured to find up to date information.
Call us today if you have any questions about listing your home as a Short Sale or wish information on the timing of Foreclosures. All contacts are not shared or disclosed.
Foreclosure Calendar Of Events
After approximately 90 days without borrower making a mortgage payment Request to initiate foreclosure received by TD. Default documents prepared and sent for signature/recording (Substitution/Notice of Default). TSG ordered from title company.
Start (Day 1) Notice of Default recorded with County Recorder
Within 10 Business Days Notice of Default (NOD) and Important Notice are mailed to Trustor/new owner on the Deed of Trust ant the property address, address on Deed of Trust and any other addresses known to lender/trustee. Notice is also sent to any parties with a recorded Request for Notice as required under Section 2924 (b) (1).
Within 1 month TSG is received and reviewed. Notice of Default mailed to all entitled parties with an interest in the property (i.e. new owners/junior lien holders) as required under Section 2924 (b) (1)
3 months after recordation of Notice of Default Notice of Trustees Sale is prepared and sent for publication
25 days prior to Sale Date Send Notice of Sale to IRS (if applicable)
20 days prior to Sale Date Begin publishing Notice Of Sale in an adjudicated newspaper. (ad must run once a week for 3 consecutive weeks)
20 days prior to Sale Date Post the Notice of Sale on the property itself. Most posting services will photograph the posting location for your records.
20 days prior to Sale Day Mail Notice of Sale on the property itself. Most posting services will photograph the posting location for your records.
14 days prior to Sale Date The Notice of Trustees Sale is recorded in the County Recorders office.
5 days prior to Sale Date The borrowers right to reinstate expires.
On Sale Date The property sale is postponed to a new sale date or the property is sold to the high bidder, or the property reverts to the foreclosing beneficiary.
Disclaimer: Presentation of these timelines is for general purposes only. No information on this page is to be viewed as legal advice or as an official description of the judicial or non-judicial process. These times are general and are displayed strictly as a service to consumers. They are not intended to be all-inclusive or to cover default situations in all states. Consumers are advised to seek professional legal counsel in any default proceeding. Always seek legal and professional advice!
If you have any questions, concerns, comments please do not hesitate to contact us.
Michael E. Anderson, Broker, ABR, RSPS Cal BRE#01417114
Call or Txt 805-698-3770 or AndersonHomePros@gmail.com