Very often I get phone calls from buyers asking if they can buy a foreclosure in Marin County. My answer is ... drum roll please... Sure! Why not? Got a suit case full of cash?
The truth is the word 'foreclosure' is often used erroneously in the description of a property. Many people don't know what a foreclosure really is. So I thought I'd straighten out the misconception and at the same time educate you, the potential buyer of a Marin County home.
A foreclosure is a home that the bank has decided to sell at the county courthouse because the owner of the home has not paid their mortgage current. A little background --Once an owner stops paying their mortgage the lender will issue a notice of default (NOD). The NOD notifies the home owner the bank will eventually sell the home at an auction. If the home owner pays the mortgage current, then the NOD is void. However if the bank pursues the NOD the home owner ends up forfeiting all equity and must move out (very often homes are sold at auction with occupants -either tenants or the home owner refusing to leave).
You can purchase a foreclosure at the auction steps with all cash. Here's how you buy a foreclosure in Marin County. All you have to do is track the houses that are coming up for sale (you'll have to buy a subscription from a vendor who tracks foreclosures), go look at those house and decide which one you want (by the way, you won't be able to get inside of the house) show up on the scheduled auction date, show your ability to purchase the property (this means bring a suit case full of cashier's checks) and bid away.
What? Track the houses coming up for auction? How do you do that? What? Auction date? What? And I can't see the inside? Show my ability to purchase the property? You mean you have to bring all cash?
OK, now that you know how to buy a foreclosure you can see it's a lot of work. And don't forget you'll be competing with the folks who actually do this for a living.
What happens if nobody wants to buy the foreclosure at the auction? Good question. The 'asset' goes back to the bank. Meaning the bank now owns the home (asset). This is known as a REO. A REO is a property that the bank attempted to sell at an auction but nobody bought it. Why didn't anybody buy it you ask? Because the property wasn't worth what the bank set as the opening bid. For example, the bank forecloses on a property with an outstanding note of 500K. But the houses in the same neighborhood are selling for 375K. The bank attempts to sell the home at auction with an opening bid of 425K because they're trying to minimize their loss. Who's going to pay all cash for a house that's over priced? So the bank then hires a listing agent to sell the house and the house is marketed as a REO.
Now, for those folks who know they are in trouble and want to bypass the whole foreclosure process, they will try and sell their home via a 'short sale'. A short sale is a home that is selling for less than what is owed to the bank. These sales are not for the faint of heart (for the seller or the buyer). If you're going to pursue a short sale, don't fall in love with the house. Think of it more as a business venture. The first hurdle to jump is the listing price. Most banks will not agree to a short sale price without an offer to purchase. For example, I have a client who owes 500K but the neighboring homes are only worth 375K. My client hires me to market and sell the house as a short sale. I list the house at 375K and call the bank and ask if they'll accept 375K. Their reply will be 'show me a purchase agreement and I'll let you know.' So when you see a short sale and a list price, just remember you may or may not get the home for that price. The second hurdle with short sales is the banks haven't yet caught up to the demand of short sale offers. So they don't really have systems in place to deal with short sales and offers often end up sitting on asset managers desks for an unspecified amount of time. Be prepared to wait for a while before you get an answer to your offer. The actual escrow process can take months when purchasing a short sale listing in Marin County.
Well, now that you know the definition of foreclosure, REO and short sale you can make an informed decision when considering offering on any of these three types of properties. Good luck, and if I can help at all feel free to call me. Oh, and by the way, obviously I didn't mention a ‘regular sale'. The easiest kind of home/property to buy!