Questions and Answers
Question: What is the number of days I have to accept or deny a counter offer from the bank on a short sale?
- It depends on what is writen on the counter offer. The California Association Of Realtors has a standard
purchase agreement that every California Realtor use. I pasted a partial copy of this
section of the Counter Offer. As you see the standard is on the
third day at 5PM. I usually send an email and Fax to be sure I am
documented. On the same purchase agreement you have an option to check and
define a different expiration day.
Warning! Normally on REOs, the banks have a different purchase agreement, which makes it harder for even the skilled California Realtor that knows our purchase agreements by heart, and has to read the fine print all over again. Bank purchase agreements may have very strict deadlines, and the process is very impersonal. They generally get multiple offers, which make things harder for the buyer. You can’t fall in love with the property, and you have to bid a little less than you would on negotiation that you would have more control. The flip side is that you will end up getting a property for much less than its potential, and that’s one of the reasons that there are so many people making money flipping properties.
Question: How can I buy a property in pre-foreclosure?
- Answer: If the property is in pre-foreclosure you have to estimate the total cost of the property as follows:
- Total of first and junior loans.
- Home Owner Association dues, Local Taxes dues, Mechanic Liens (owned to purchase agreementors, etc)
- Repairs, upgrades, cost to bringing the property in compliance with city codes.
- Compare the total of
items above with the resale value of similar property in good
condition plus a margin for your management, risk and profit.
Click here to check the estimated values of the property and similar properties neighboring a certain address
- If you are satisfied with the risk/profit you can buy the property directly from the owner before it goes to the public auction, but you have to pay cash for the balance of the liens above.
Question: How can I buy a foreclosure in an auction?
- First you have to find the property. The balance of all liens and repairs has to be less than the potential market value plus profit, which is very uniquely to happen with current depressed real estate prices.
- You have actually to chase a property that will be auctioned, because there are many ways that the auction or trustee sale can be postponed. Most of the properties scheduled to be auctioned or with trustee sale date scheduled are in modification or in short sale. In the extreme circumstances the defaulted owner still has the recourse of the bankruptcy that stops everything.
- Considering that the property has equity and will finally go to auction; you need to be present or represented by someone with power of attorney, and bring cashiers check for the bidding.
- After the trustee sale a Trustee Deed Upon Sale is issued.
The Trustee Deed Upon Sale transfers title to the successful
bidder. The Deed must be signed by the Trustee, acknowledged by
a notary public and recorded. After the Deed has been recorded,
the new owner gets a copy of it.
Question: The property went to an auction and the transfer value was a few $1,000s. What does that mean?
Answer: If you are not satisfied with
the risk/profit, you were probably right, and you will have another
opportunity to get that same property and generally for much less.
- The bank will bid at the auction with the default amount - minimum bid - and in the majority of the cases they will win. That happens because most of the foreclosure properties are under water - they are worth less than the mortgage balance. You may see in some websites that the transfer value was a few $1,000s , but the truth is that it is on top of the mortgage balance. If the property is sold for more than the balance of the mortgage, the defaulted owner gets the difference.
- The bank is now the owner of the property; hence the title Real Estate Owned – REO, or bank owned property The bank will have to sell the property to recover some – if not all the losses.
- That’s when you can get
it for much less. In addition, you have more time to inspect the
property, and all the other liens are already cleared.
Question: How do I buy REOs?
- The process is the same
as buying any other property, and starts with finding the property.
Click here to find REOs in Long Beach and vicinity
- The few differences are that lenders usually use a different purchase agreement, and it requires more disclosures, but the buyer’s agent will take care of that for you.
Question: Do all REO sales have to be cash deals?
- Lenders do prefer cash
deals, but pre-approved buyers with good fico scores, proof of funds
for the down-payment, and a higher deposit will certainly do fine.
That’s why it is important to get pre-approved first.
Get your free pre-approval letter here
- Lenders also prefer owner occupant for basically 2 reasons: They will not put the house back in the market, which puts pressure on prices, and also because it is easier for an occupant owner to be approved on a mortgage loan.
- If you are flipping a property, you may find harder to sell the property for non-occupant owner for the same reason.
Question: What can I do to avoid foreclosure?
- You can apply for modification. That will delay your foreclosure.
- You can short sell you home through the government sponsored HAFA program and get $3,000 to move out of your home.
- You can consult a lawyer about bankruptcy that in some cases can stop foreclosure. Please see the video bellow.
- You are encouraged to consult a lawyer.