Sacramento Foreclosures
Buying a Foreclosure -- Frequently Asked Questions
If you pick up a newspaper these days, I'm sure you know that many homes in Sacramento County
are in for closure or heading that way. There are many reasons for this, including overenthusiasm
in the 2002-2005 market frenzy, creative financing, predatory lending, falling home prices, etc.
Whatever the reasons, foreclosures now represent a tremendous opportunity for qualified buyers
to save money when they buy a home. And in August of 2007, 25% of all buyers who purchased a
home in Sacramento County bought a bank owned foreclosure.
Q. What is an REO?
A. REO stands for Real Estate Owned, and is another name for a bank owned property, sometimes
loosely referred to as a "bank repo". In other words, no one else bid a suitable amount
for the property at the trustee sale, and now the bank owns it.
Q. What is a short sale?
A. A short sale is a sale where the seller is typically behind on his payments, and the
bank is asked for approval to sell the home at less than the amount of the loan. That
is to say, the seller is "short" on the funds to pay off the note.
Q. Do I need all cash to buy a foreclosure?
A. You probably will if you're buying at a trustee's sale. However,
if you buy a Short Sale property or REO, financing is almost always an available
option, just as it is on any other sale.
Q. Do I have to get financing from the bank that owns the property?
A. No, you don't, however, sometimes the bank that owns the property will require you
to get pre-qualified through one of their lenders. They may also offer you incentives
to borrow from them, such as reduced rates or fees, etc.
Q. What is the main benefit of buying a foreclosure?
A. Price! In the first half of 2007, for example, the average short sale sold
for 13.4% less than the average "conventional" sale, while the average REO
sold for 14.8% less. Of course every sale is different, but generally on a
non-foreclosure sale the amount the seller would spend is nowhere near this
amount, so you can easily put the savings toward repairs and still be
getting an incredible value.
Q. What drawbacks are there to buying a foreclosure?
A. Most short sales and almost all REOs are sold with the expectation that the seller
won't do any repairs. The sale is "as is". This doesn't mean you don't have the right
to inspect the home, however. We recommend and encourage buyers to obtain the
same inspections they would get on a non-foreclosure sale so if anything really
major turns up, they can cancel the agreement.
Q. Are the disclosures the seller provides different?
A. Yes. In the case of REOs especially, some of the disclosures that would otherwise be required are not.
For example, the seller needn't disclose what they know about the property using a Transfer
Disclosure Statement (which makes sense,
since the seller is a bank that may be hundreds or thousands of miles away and may have never seen
the property). Your agent still has a statutory duty to inspect, however, and as we mention
above, you should still get the same inspections done as you would on any property.
Q. Are there other important differences between foreclosures and regular sales?
A. The main thing that we always tell our buyers is to expect a sale that's less convenient
for you in terms of time frame. The typical time scenario on short sales (and some REOs)
goes something like: wait, wait, wait, wait -- hurry up and get it done now! The way
I look at it, however, for the type of money you'll save, a little inconvenience during
the sale process is no big deal at all.
Q. If I buy a foreclosure, can't the previous owner buy it back?
A. Most probably not. The vast majority of what we call "mortgages" in California are in fact
deeds of trust, and are sold via a trustee sale, not a judicial foreclosure. Unlike
judicial foreclosures, there is no right of redemption following a trustee's sale on
a deed of trust. If you have a concern, we can verify the terms of the foreclosure sale for you.
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More About Foreclosures
Browse REOs (Bank Repos)
These bank-owned properties are available NOW in the MLS. Browse . . .
Sacramento County REOs
Placer County REOs
El Dorado County REOs
Foreclosure Articles
Check out the latest articles about bank owned properties, short sales, and the foreclosure market in our Real Estate Blog.
Foreclosure Laws
We've posted some of the statutes relating to foreclosures.
Most of these apply if you're an investor interested in buying before the time when the property is bank owned.
If you're looking to live in the home yourself or buying a bank repo, you can ignore most if not all of this material.
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