Buying Short Sale Property

Foreclosure and Trustee Sales

California real estate foreclosure auctions begin with a minimum bid that includes the loan balance and accrued interest. Often there are attorney fees and foreclosure processing costs included. Bidders must have a cashier’s check in hand for their bid amount.  The successful bidder agrees to take the property as-is. This includes all liens against the property and possibly tenants still living in the real estate. 
In most cases what is owed on the loan at a foreclosure auction is higher than the market value of the property.  Since most foreclosure auctions don’t result in a successful sale, the property often goes back to the bank. It then becomes a REO or real estate owned property.

Purchasing REO’s (Real Estate Owned)

A Reo property is property that ends up back at the mortgage company after an unsuccessful foreclosure auction. When the bank owns the property the mortgage no longer exists. The bank handles all the evictions as required and may make some repairs. The bank is in position to negotiate the removal of any liens with the IRS and pays off any home owner association dues if they exist.  When you purchase a REO property you’ll receives a title insurance policy and can investigate the property.
Your CRES agent is experienced at purchasing REO’s and not all REO’s are a good real estate value. Due diligence must be taken and research performed to indicate that the purchase price is comparable to homes in the neighborhood. Your agent will avoid any bidding wars and will advise against paying over market value. A CRES agent can advise you on any renovation that maybe required and a timeline that it will take to complete them.

How a bank handles  REO’s

Each bank has its own criteria for selling REO’s but they all have the same goal. They want the best price possible for the property. The notion the bank just wants to dump real estate cheaply is just a myth. They often have a whole department that specializes in their REO properties.  When you make an offer on the REO property you can expect a counter offer from the bank. Beware of the price the bank will counter offer. Banks have investors and auditors and the bank will have to prove to them they tried to get the highest possible price for the real estate. Since offers must be approved by several different individuals and companies the bank may include a time limit of 5 days before finally accepting the offer. Before entering into an offer the CRES agent will be able to provide you with this information:

• How long will it take the bank to accept the offer
• If there are any inspection reports available for the property
• Is the property sold as-is
• What work has the bank agreed to do, if any

There is no formal presentation of the offer and in most cases the offer is simply faxed to the bank. Don’t expect any action from the bank on weekends or after hours.  Your CRES agent may ask you for a biography and pre-approval letter from your mortgage company to make the offer easy to accept. REO transactions have special concerns that your CRES agent is knowledgeable and experienced at dealing with. With guidance and following safe procedures an REO transaction may make sense for you.

What is a Short Sale?

A short sale means the seller's lender is accepting a discounted payoff to release an existing mortgage. Just because a property is listed with short sale terms does not mean the lender will accept your offer, even if the seller accepts it. Do your research before making an offer to purchase. Your agent can find out who is in title, whether a foreclosure notice has been filed and how much is owed to the lender(s). This is important because it will help you to determine how much to offer.