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With so many forclosures on the market today how are they going to be handled. How long before they get sold again and how do you go about getting one?
Every state has differnt laws in terms of how long it takes to get to foreclosure and how long the owner has to "redeem" the property.
In FL, A lender can file for foreclosure as soon as a mortgagor defaults on the mortgage contract, in general though they wait until the loan is 60-90 days dilinquent. At that point the Lender starts the foreclosure process and files the appropriate actions in court. It usually takes between 30 and 90 days depending on a number of factors.
The homeowner has up until the day of the sheriff's foreclosure sale to payoff the lender and court fees. If this does not occur the property is auctioned to the highest bidder at the court house.
The minimum bid will be for the unpaid balance owed to the lender, if this amount is higher than market or an investor can't make a profit, and no one bids the property is given to the lender.
Once this occurs the property is now considered REO or Real Estate Owned by the bank. The bank is not in the business of real estate and do not want to own property. The banks hire Realtors to sell the properties for them. They usually establish a price by utilizing BPO's or Broker Provided Opinions of value, and they expect that value to sell the property quickly. You can find these REO's on the MLS, and any realtor should be able to search specifically for REO properties.
To purchase an REO is much the same as purchasing from anyone else, except it may take a little longer to receive a responce back from the bank whether they accept your offer or not. And more often than not the properties are pretty run down. Banks will usually perform trash outs and make the property habitable, but not much more than that.
If you are looking for a bargain on a foreclosure you will have to wait. The majority of the REOs on the market, at least in my area, foreclosed high and have been listed high.
I made an offer on one for what my Realtor & I thought was a fair price for the condition of the house and the location it was in. The offer was much lower than list. The seller countered with a whopping $1,000 off of list. They have since lowered their asking price by a whopping $5,000. I can not believe that the banks are wanting to sit on these properties, but I have looked at quite a few and they were all way over priced.
Can't speak for REOs anywhere but here. It may be different in your corner of the world.
Price and willingness to negotiate also depends on the lender that holds the REO. Some lenders are much more willing to get the home off their books than others and, therefore, will take substantially less than their asking price.
You can find these REO's on the MLS, and any realtor should be able to search specifically for REO properties.
I think Greg is dead on with the exception to this portion. You can find some of these on the MLS but the vast majority are not and most realtors I have met over time are traditional real estate sales. Finding the "deals" is a different art and a specialty within real estate as a whole. If you want to buy REO's at the bottom you are going to have to be ready and with the right person mainly because the REO's I deal with are bought (and not to mislead that I sell them all) in packages up to and in excess of $100 million so to get one you need to have a connection with that buyer to possibly flip to you.
Don't misunderstand though; Greg is right and you can pick up deals on the MLS. I just maintain that given current market conditions you have to get outside the box of traditional sales to find the best investor deals.
Greg - you have some great posts; let's talk shop sometime
There's two steps to a foreclosure. Both are public records, and can be accessed easily through a title company, paid service, and most realtors. If you're looking for a good deal, the Notice of Default stage is the time to move. This is the stage where the bank/lender starts proceedings of a foreclosure. It files this with the county, and it becomes public record. Many people are able to get caught up at this point, or sometimes make a forbearance agreement with the lender.
However, if you are diligent and move fast... you can get a property for a fairly good price. You need to do your research though, and know that others will be after hot properties within about 1-2 days of the NOD being filed. Essentially, you see the property listed as an NOD. You research the balance of the mortgages from public records, then you look at what the actual value is. If there is equity, you may be able to offer the sellers enough to pay off their house, and walk with $10,000. Many people who know they are toast, will take the money they would not likely get otherwise, and you get your house.
If you're trying to buy at the foreclosure stage, you're limited to the waiting game. Most houses won't go for a steal within the first 3 months... If there is equity, the bank may try and make up for other losses on properties with little or no equity... or as noted above, it may go high in an auction before it even hits the MLS.
So . . . how do you find out about Notice of Defaults? Is there a quick, easy way to get the latest NOD's? I have a client who's sure he's going to get stung on the price of a home unless it's a foreclosure. That doesn't seem to be the case around here. Almost all the REO's are priced high, mainly because the majority of foreclosures around here were 100% loans when the market was hot; thus the REO's are trying to recoup as much as possible. Are there really that many homes in foreclosure where the owners are walking away from equity in the home?
And short sales. I can't picture a bank taking 10% less than the mortgage balance plus paying commissions, etc. Those of you that deal in Short Sales, what have you been seeing as far as how much less a lender might take. I've even heard some banks would prefer to foreclose rather than do short sales.
We're just now starting to see some foreclosures in my area, mainly because Prescott is a relocation destination for retirees who've cashed out of more expensive markets. We had our share of investors in 04 & 05 and some of them are in trouble, but again, we're talking 100% financing. So far, I'm not seeing foreclosure bargains around here, but maybe I'm not looking in the right places.
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Until the sheriff sale you must go through the homeowner. The bank can not negotiate with you.
Also the minimum bid will not always be for the balance owed quite often it will be lower, depending on the condition.
The last thing that happens before the minimum bid is set, is the foreclosure rep orders 2 BPOs The package is then sent to the dept head and it is reviewed for pricing.
You would not believe how often I saw below mortgage balance minimum's.
One that stands out in my mind was a few years ago. This house was in a nice neighborhood where the values were around $90k. We had received tons of calls from people wanting the house. Because of the neighborhood.
The balance was around $77k the min bid was $43k because there was an est of $30k in damages to the inside of the house. Kids had gotten in and turned it into a party house.
As my boss use to say "We don't want this kind of house in our REO dept."
If you have the time you can call some of the Realtors in the area and ask if they do "bank foreclosure BPOs" If there is a property going to Sheriff sale that you are interested in it might be worth the money to have them do "driveby" it will give you an idea of the property's value.
Another thing to keep in mind if there is a 2nd on the property you maybe up against the 2nd mortgage holder who will bid to protect their interest.
So . . . how do you find out about Notice of Defaults? Is there a quick, easy way to get the latest NOD's?
Like Karla said, similar to my initial post...going through the home owner is likely your best bet. You also get to bail someone out, who may get money they never would have received otherwise.
Any local title company will be able to have access to NOD's and can e-mail them on a daily/weekly basis. This is something they provide to me as a lender, but I'm not positive on how they would do it for the general public.
You can also look online and subscribe to services which give you all the new NOD filings. I have never used one, and really don't know anything about them... just that they exist.
My advice would be to find the local loan officer you plan to use, assuming you're not just paying cash. They will be able to supply you with NOD filings through the e-mail, because their title company should supply them. In addition, you can also call the county you are looking to buy in. They very well could also provide a service that you could buy. The title companies have to get their info from somewhere, and I doubt each company has one person per county sifting through everything... they probably buy the info as well.
I think Greg is dead on with the exception to this portion. You can find some of these on the MLS but the vast majority are not and most realtors I have met over time are traditional real estate sales. Finding the "deals" is a different art and a specialty within real estate as a whole. If you want to buy REO's at the bottom you are going to have to be ready and with the right person mainly because the REO's I deal with are bought (and not to mislead that I sell them all) in packages up to and in excess of $100 million so to get one you need to have a connection with that buyer to possibly flip to you.
Don't misunderstand though; Greg is right and you can pick up deals on the MLS. I just maintain that given current market conditions you have to get outside the box of traditional sales to find the best investor deals.
Greg - you have some great posts; let's talk shop sometime
Sounds like your on another level as far as investment in real estate goes. I know the best deals are always negotiated directly with the banks and done in bulk, but have ZERO experience or knowledge of what goes on in those deals or even how to get in contact with the powers that be. I was talking mostly to the average joe that most likely doesn't have the fiancial backing to buy in bulk from the banks. I love to learn more from you and think I'll take you up on your offer to talk shop. You have DM.
Like people some banks have more of a motivation to sell than others. Heck I think some banks don't even know what they are selling their properties for, its usually a servicing company that deals with selling a banks REO properties. REO's owned by the national banks not in any liquidity trouble like BOA, Wachovia and so forth aren't in any rush. Other, mostly Wall Street fed, banks however need all the liquidity they can get....*cough* countrywide *cough*
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