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I apologize in advance if this has been covered in previous threads, but I could not really find a good comparable thread.
I'm located in Pasadena, CA and am looking at purchasing a home for the first time, probably later this year, but obviously it's important to plan on advance for these kind of things. I've spent plenty of time looking on sites like Redfin, Ziprealty, etc., to get a feel for housing prices listed and what homes are actually selling for. What I've noticed is most houses are listed for way above what comparable have sold for (like 20-30% higher in many cases). This has led me to look at foreclosure listings.
However, I am somewhat confused about how to go about purchasing a foreclosure. I understand how to buy a normal house (either work for yourself or get a buyers agent, they go on MLS, etc.), however, I don't really see foreclosures on the MLS (some short sales) and I know there are subscription services to find one, but if I end up having to hire my own agent then I don't see why I should pay for this myself.
So my questions are:
- Should I find a buyer's agent that specializes in foreclosures or subscribe on my own to these services and do it on my own? Will these agents have access to non-MLS listed foreclosures/short sales? Will they work for the major brokerages (Remax, CB, etc.)?
- Is it possible to secure FHA financing on a foreclosure? Does it matter that my budget for a home will be $400-600k? Will I have to pay more for a mortgage or have more trouble financing a foreclosure?
I would greatly appreciate any help you can provide. I understand that buying a foreclosure/short sale is a pain in the butt, but such is life in the current market.
Actually buying a foreclosure is not a pain in the butt. They are like typical real estate transactions with the banks insanely long addendum attached that you essentially give up any rights to sue the bank for anything...
Most foreclosed homes go in the MLS. I would not pay for a service, but hire a good agent that you trust.
Yes you can do FHA financing on a foreclosure.
Short sales are a different beast, but you can still do FHA financing on them.
Most foreclosed homes are on MLS and can be shown by any agent. Hire a good agent that has REO experience.
You can do FHA but if it's not move in ready you'll need a 203k loan. If you get a lender that offers 203k and the home doesn't qualify for the standard FHA your lender can flip you into the 203k loan. Your Realtor should know about 203k and have a lender to recommend. If the agent isn't familiar with the 203k hire someone else.
I am assuming that a realtor that has good REO experience will be able to show me or find me foreclosed homes not on MLS? Or am I going to have to deal with a separate third party directly that works for a bank or some other institution?
I apologize in advance if this has been covered in previous threads, but I could not really find a good comparable thread.
I'm located in Pasadena, CA and am looking at purchasing a home for the first time, probably later this year, but obviously it's important to plan on advance for these kind of things. I've spent plenty of time looking on sites like Redfin, Ziprealty, etc., to get a feel for housing prices listed and what homes are actually selling for. What I've noticed is most houses are listed for way above what comparable have sold for (like 20-30% higher in many cases). This has led me to look at foreclosure listings.
However, I am somewhat confused about how to go about purchasing a foreclosure. I understand how to buy a normal house (either work for yourself or get a buyers agent, they go on MLS, etc.), however, I don't really see foreclosures on the MLS (some short sales) and I know there are subscription services to find one, but if I end up having to hire my own agent then I don't see why I should pay for this myself.
So my questions are:
- Should I find a buyer's agent that specializes in foreclosures or subscribe on my own to these services and do it on my own? Will these agents have access to non-MLS listed foreclosures/short sales? Will they work for the major brokerages (Remax, CB, etc.)?
- Is it possible to secure FHA financing on a foreclosure? Does it matter that my budget for a home will be $400-600k? Will I have to pay more for a mortgage or have more trouble financing a foreclosure?
I would greatly appreciate any help you can provide. I understand that buying a foreclosure/short sale is a pain in the butt, but such is life in the current market.
It depends on what you mean when yu say you want to buy a foreclosure.
Do you want to buy a house at the foreclosure auction?
Or do you want to buy a house on which the bank has already foreclosed and now holds in their inventory?
Two very different purchases, each with it's own set of rules.
I won't go into both here. Let us know which one you are considering, and several of us will have good info for you.
I am traditionally thinking about a bank held foreclosure or one that is being brokered by a more traditional sales person (i.e. a realtor).
The auction route does interest me somewhat, enough for me to want some additional information. I read an article or two about it and they mentioned needing to purchase the sales in cash. I'm not really interested in putting down more than 25-35k on a house (FHA will allow me to do that) but I have access to 100-150k in capital (I run a business so I can pull money out) if I need it on a short term basis, but my ability to make income will be crippled if I have to pull all my business capital out in order to buy a house, so this is a concern if there are problems on the financing end.
Any basic info you have about the auction thing, specifically the financing end, would be very informative.
I am traditionally thinking about a bank held foreclosure or one that is being brokered by a more traditional sales person (i.e. a realtor).
The auction route does interest me somewhat, enough for me to want some additional information. I read an article or two about it and they mentioned needing to purchase the sales in cash. I'm not really interested in putting down more than 25-35k on a house (FHA will allow me to do that) but I have access to 100-150k in capital (I run a business so I can pull money out) if I need it on a short term basis, but my ability to make income will be crippled if I have to pull all my business capital out in order to buy a house, so this is a concern if there are problems on the financing end.
Any basic info you have about the auction thing, specifically the financing end, would be very informative.
I can speak to the process as it works in NJ. Hopefully, someone from your area, (California, right?) can step in and let us know how differently things work out there.
Here in NJ, the auction is advertised for a minimum of four weeks in advance. The auction is a live and open process. There is no such thing as a sealed or hidden bid. A representative of the foreclosing bank is at the auction, and will usually be bidding agaisnt anyone who bids, until the bid gets up to a number acceptable to the lender. The winning bidder is required to post a minimum of 20% of the total bid amount immediately, in the form of a cashiers check or certified check. The remainder is due no more than 30 days later. It's a good idea to have some basic financing lined up prior to bidding at the auction, so you can be sure you have the ability to close the sale. If you can't close the sale for your own issues, you may lose the deposit. The property will be resold, and that first wining bidder who failed to close will be held responsible for certain costs & expenses. If the sale doesn't close for other reasons, like there are leins on the property that were not disclosed prior to the auction, you may be able to withdraw and get your deposit back.
Just as an aside, the owner of the home that is bought at sheriffs auction has ten days from the date of the auction to "redeem" his property, that is, pay the outstanding amount on his mortgage and make it current again. If he can do that, the winning bidder gets his deposit back and there is no sale.
Hope this is helpful. Feel free to ask more questions if you have them.
I was pursuing trying to purchase a foreclosure at auction and was not able to locate a source of conventional financing. Basically, any type of conventional mortgage requires an appraiser to be able to enter the house and with the foreclosure auctions, you can't have access until after you already close on the property. If you can come up with enough short term cash to purchase outright and then want to get a mortgage for the long term, it is considered a cash out refinancing and you will end up paying around 1/2 point higher interest rate. My conclusion is that it is really not that practical for an individual homeowner to buy at auction. It is much more practical to let the bank take it back and buy as a REO.
Hope that helps.
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