REO Blog

Sales at foreclosure auction jumped dramatically in July, increasing by more than $2 billion in combined loan value, according to a report released Tuesday.

Discovery Bay-based ForeclosureRadar, a Web site that tracks California foreclosures, said total sales at foreclosure auction in July reached $12.55 billion, representing more than 1,300 properties being taken to auction per business day, up from 415 per day a year ago.

Notices of default declined for the third straight month. The total number of properties that are still actively scheduled for auction increased to 64,598 at the end of July, up from 59,973 at the end of June and 53,793 at the end of May.

Santa Clara was ranked 42 in the state in total foreclosure filings, up from No. 40 a year ago. The county had 1,144 notices of default -- 14 percent up from June and 365 percent up from July 2007.

Santa Cruz County was No. 47 with 285 notices of default, down 29 percent from June and up 129 percent from July a year ago.

Monterey County was No. 16 with 498 notices of default, down 1 percent from June and up 314 percent from July 2007.

ForeclosureRadar reported that statewide, sales increased to a total of 28,795 properties with a combined loan balance of $12.55 billion. Of those, 27,817 received no bid higher than the lender’s opening bid and became bank owned.

Sean O'Toole, founder of ForeclosureRadar, said 91 percent of the decline in notices of default since April "can be attributed to Countrywide Financial. Unfortunately, this is more likely due to the challenges of integrating two companies the size of Countrywide Financial and Bank of America than it is a fundamental shift in foreclosure activity.”

As of 5/25/2008 there are 227 actively listed REO properties in Temecula ranging in price from 148,750-2.5m

In Murrieta there are 378 Active REO listings ranging in price from 139,900-1.9m.

Are you curious to know how many in your neighborhood?

Is there a better time to purchase an REO?

Intial market offering or waiting 90-120 days???

5. Financing.

With good credit, many banks will loan the full price of the foreclosure or more. If the home is to be used as a rental, many banks will require only a 10 percent down payment. Foreclosure investors with a large amount of equity in another home may get a line of credit from their bank to purchase a foreclosure. When they convert the line of credit to a mortgage, no down payment may be required.

4. The Offer.

Although most banks want to unload their foreclosed properties, they won't necessarily do so cheaply. So you aren't guaranteed a fabulous price. But remember you're dealing with an eager seller. Even though the bank's REO manager or their listing agent might suggest that the list price is "firm," never be afraid to negotiate price — especially if the foreclosed bank-owned home needs repairs. When submitting a low offer, you need to substantiate the reduced price in writing and document your case. You should furnish photographs and cost estimates for repairs to support your offer amount.

3. Negotiate.

Investors should be prepared to negotiate a lower down payment, a lower interest rate, a reduction in closing costs and a lower asking price. Many lenders may be willing to waive some closing costs, maybe even offer a break on the interest rate or the down payment. Moreover, some lenders might offer to finance the property at a below-market rate or with a lower-than-usual down payment. Don't be afraid to ask for a better price and favorable terms.

2. Title Search.

Once a home has been located, search the public records for liens and outstanding taxes. You can perform a preliminary check of title on RealtyTrac and then hire a title company to run a full, insured title search before closing the deal. Liens on the property can drive up the purchase price. Common liens typically are placed on a property for unpaid loans borrowed against the property, taxes or unpaid contractors (mechanics liens). These liens remain intact until the money is paid, which means that you may have to pay off the liens on the foreclosed property you are buying — even though you're not the one who didn't pay the property taxes. Banks should clear the title before selling but never assume this is the case — just as you would if you were buying a property from anyone else.

Most foreclosure properties are referred to by investors as "distressed" properties. Bank-owned foreclosure homes are usually sold "as is," which means that the 15 percent discount you just saved on the purchase price can easily be eaten up by unforeseen expenses — such as repairs not immediately apparent in an exterior inspection. Many owners of homes that go into foreclosure have been struggling financially, which usually means that the house has not received needed repairs or general maintenance for a while. Some homeowners who lose their property to a lender frequently damage the property. So be prepared to do renovations and repairs. Hire a licensed home inspector to give you a written estimate of the cost to repair the property. Budget that number into your purchase price. Repair costs can be used later in your negotiation with the bank to reduce the asking price.

Foreclosure is a complex process but understanding its impact on real estate can make you a more astute buyer.

I frequently have people asking me to inform of properties that have been foreclosed upon. Many people believe that the unfortunate circumstances that lead to the foreclosure in first place will result in real estate savings. This is quite commonly a misconception, although not always the case.

Foreclosure is the process that allows a lender to recover the amount owed on the defaulted loan. They do this by selling taking ownership (repossession) of the property therefore securing the loan. This process begins when the borrower fails to make loan payments or defaults on one or all the conditions of the mortgage. The lender must file a public default notice, called a Notice of Default.

The Foreclosure process can end in one of four ways:

1. The borrowing reinstates the loan. The lender, allowing a grace period so the borrower can repay the default amount, accomplishes this.
2. The borrower sells the property to a third party during the pre-foreclosure period. This allows the borrower to repay the loan amount in full and saves the credit impairment of having the home foreclosed upon.
3. A third party buys the property at public auction, at the end of the pre-foreclosure period.
4. The lender takes ownership of the property. This is often with the intent that the lender will resell the property to a third party.

The foreclosure timeline is a simple process as well:

1. Default takes place
2. A lien is placed against the property in the first 30 days after default.
3. After 30 days a Notice of Default is delivered to the borrower.
4. After 90 days a Notice of Sale is provided to the borrowed allowing them up to 25 days to sell the property.
5. Finally if the property remains unsold the lender takes possession of the property.

What potential buyers fail to realize about this process is that the lender wants their money back. Banks are not in the process of loosing money. As a good example look at the profit and lose statements they produce annually. They want the money they lent back and as much of the revenue they lost as a result of the foreclosure process as possible. In this regard lenders are very patient and astute sellers, they often will while away there time waiting for a profitable offer. At the very least they want to show as little loss a humanly possible.

REO / Foreclosure property

Daily Real Estate News  |  June 29, 20077 Tips for Foreclosure Property Investing
With foreclosures rising nationwide, prices falling, and inventories swelling to historic levels, investors with a discerning eye and knowledge of the foreclosure process can build a profitable portfolio of distressed properties, says James Saccacio, CEO of RealtyTrac, which tracks foreclosure data.

Saccacio offers this basic advice to foreclosure investors:

• Know your market. The most important tool in your real estate investing toolbox is knowledge of the area where you plan to invest.

• Develop an appropriate investment strategy. Find an investment strategy that will work in your market, and then do what it takes to implement that strategy.

• Make the foreclosure process work for you. Decide what foreclosure buying technique works best with your investment strategy and your strengths as a person.

• Scrutinize each deal. Many real estate investors wrongly assume that if a home is in foreclosure it's a good deal.

• Rely on a trustworthy team. You'll be in over your head if you try to do all the work involved in foreclosure investing on your own.

• Act quickly, but don't be in a hurry. A slow real estate market gives you the upper hand as a buyer, but you'll still need to act quickly to get the best deals.