A client recently asked me how we can try to purchase a distressed property, we get asked this question a lot so I felt that it may be a good topic to pass along my response:
Since the market has started to recover in the past two years or so (in the North Bay), we have seen more and more equity coming back into the market which has contributed to a significant decrease in the amount of properties that are pre-foreclosure and/or being foreclosed on.
There are many websites that will list properties that are in pre-foreclosure status as that is public information, this can be a little misleading because pre-foreclosure only means that the homeowner has missed three or more payments with the lender. Often times this can happen while an owner is working on a loan modification with their current lender and the home is not ever going to hit the market (at least as a result of the missed payments).
Secondarily, if a home does come on the market or becomes available as a pre-foreclosure sale (most likely a short sale), the lender has to approve of the price and terms of the contract and they will order an appraisal to make sure that the offer is in line with current value, so the misnomer that you can “get a deal” on these homes is not true because the bank is not going to give it away and take a greater loss than necessary. The same is true for homes that have been foreclosed on, the banks will not pre-sell these properties and they typically have to be on the open market for at least 7-10 days before the bank will consider any offers, and in most cases they are not flexible on price.
The best “deals” are sometimes found on the courthouse steps when the properties are being auctioned off by the bank. If the house does not sell at the courthouse then it gets listed and goes on the market at a later date as a bank owned listing (aka REO listing). The courthouse auction purchases are all cash deals….and they are always as-is/where-is. The buyer would inherit any occupants that are still there, any additional liens that are attached to the property, etc. The investors that purchase these homes usually have a team of people (often an attorney and a title company) researching these properties for them beforehand so they know what they are getting in to. Again, we are seeing much less of this now since there is equity in the market and people are not walking away from their properties as they were in previous years, which is a good thing! It is very encouraging to see the equity coming back at a healthy pace!
If you have questions about your home value or sales in your area, please let us know, we would be happy to assist you!