on this post - (1) PostsWell we’ve all heard about foreclosures and buying homes at the “courthouse steps” for pennies on the dollar…but if you don’t know what you are doing Buyers Beware! I just returned to my desk after spending some time at the courthouse steps this morning (literally “on the steps”) to attend an auction for a home that was being foreclosed upon. A brief history on why we attended the auction:
We have had an offer in on the home, which was classified as a “short sale” for a few weeks now. A short sale means that the current owner needs to sell and cannot make payments to the bank so they are applying to the bank to sell the home to another party short of what they owe to the bank. Banks generally ask for detailed financial information from the owner and will review that information, the offer to purchase by another party, and the foreclosure costs to determine if it is in their best interest to accept the offer and sell short of what the current owners owe on the home.
We pulled information about the home and determined that the home had a sale date of today at 11am and, unless postponed, the auctioneer would announce it for sale and if nobody bid on the home it would be sold back to the bank. Knowing that we had a decent offer submitted and contacting the listing agent enlightened us to the fact that the other agent was trying to push off the sale date for a couple of weeks so that the bank would have time to review our offer prior to it foreclosing on the property. This, however, didn’t work and the home was put up on the block, with no bidders, and sold back to the bank. This home’s fate is to be set by the bank which, most likely, will contact a listing agent that they work with, get estimates of value from other agents, and re-list the home on the market for close to fair market value.
Buyers today seem to think that a REO (Real Estate Owned by the bank) or “foreclosure” is destined to be a great deal and this is not always accurate. In the market today the banks are using Fair Market Value prices when listing their homes and may or may not negotiate from there. Yes, you can pick up a good deal on some homes but many are given the same value for a comparable that may not be a foreclosure.
In order to contend at the courthouse steps and be able to buy a home there, you need to have cash (cashier’s checks) for the amounts you will be bidding. You must present them to the auctioneer to even qualify to place a bid and they will know what you are then qualified to bid up to. You can only bid with the amount of money you check in at the auction table so come over-prepared just in case. Pre-approval letters from a lender will not be accepted. If you have great credit but not liquid assets think about finding a “hard money” lender that will lend you the cash on a temporary basis for a quick return when you take out a loan with a traditional lender after winning the home at auction.
More to follow about researching the title before bidding!
