A blog reader emailed me the following excellent question about foreclosures.

Hello there. I came across your blog in doing some research on foreclosed homes and you seem to have an in depth knowledge about what’s going on.  My question is that I have looked up several foreclosed homes and some have prices under 10,000!!!  That seems incredibly “too good to be true” but my next thought was that it was the default amount and that once it was paid the buyer would resume the standard payments which put the original owner behind. How do these work???  If I walk into a real estate office with 10K is the house mine, free and clear?

The Answer:

Thanks for your email and your generous comment about in depth knowledge!  I appreciate you saying so.  You raise an excellent question.

Yes, I suspect you’re looking at some number other than the price.  On average, foreclosures are pretty great bargains, but not that great.  To give one example, I just checked in Rosemont 95826 and the average non-foreclosed home (single family home or condo) is listed at $213,087 for 1130 square feet.  The average bank owned foreclosure is 1297 square feet and listed at $195,976, so the discount is between about 9.9% and 19.9% depending on whether you look at raw averages or price per square foot, respectively. 

Even if the default amount is $10,000, that’s not what it will likely sell for on the courthouse steps (at the trustee’s sale).  Buying at the time of the foreclosure sale requires cash and there’s no inspection period, so it is appropriate for experienced investors only.  (See http://law.onecle.com/california/civil/2924h.html).

Very often a property won’t sell at a trustee’s sale or a bank holding one of the loans will buy the property back, generally these homes end up listed in the multiple listing service, meaning we can work with you to help you buy these.  Properties like this are called by many names including “REOs”, “bank owned”, or “foreclosures”, “bank repos”.  We have literally hundreds of these available, and you can browse or search for them at our foreclosure search page.

Financing is available on these and you have an inspection period to make sure the home is reasonably sound.  These are excellent choices for a private buyer, which is probably why about 60% of what’s selling in Sacramento County at present are bank foreclosures.

Do You Have A Question?  Why Not Ask The Realtor®

We love hearing from people who have a question about buying or selling real estate, and we’ll do our best to answer you via email as quickly as possible.  Often we’ll post the answer here, too, but naturally we will not post anything in the email identifies that identifies who you are.  If you ask about a specific property you own, for example, we’ll remove the address but may answer the question in a general way. 

Simply send in your question via our contact page, and we’ll take it from there!

blog comments powered by Disqus