Can a real estate professional help you to buy a foreclosure? There are some nuances to this answer, but in short, it depends. We haven’t had many foreclosures in recent years, but once in awhile we find them popping up here and there.
There are several stages in the foreclosure related sales in California. Often, homes somewhere in this quagmire are listed on our Silicon Valley area MLS or multiple listing service. If a property is listed in the MLS, then yes, we Realtors can help home buyers with a distressed sale purchase.
The stages of foreclosure
- Pre-foreclosure (where payments have been missed and a Notice of Default or NOD has been filed – sometimes these homes are on the market and included in the MLS.
If they’re in the MLS, I can help.
If these properties are for sale, often these are short sales (but short sales are not always in pre-foreclosure – they may not have missed any payments).
- Trustee’s sale, or actual foreclosure on the courthouse steps. This does not involve the MLS or Realtors at all. There is literally no role for the real estate agent here unless you, as the buyer, want to pay the commission (most buyers don’t in this circumstance).
There are some big caveats and warnings!
First, often what’s owed against the home is more than it’s worth and the only way to purchase a home here is to pay off all the debts (so it may not be much of a deal!). Some buyers who “bought” a home actually have only purchased the second deed of trust, not the first, and are left empty handed.
Second, if you buy here, you get NO inspection contingency and must pay cash for the house. End of story – no backing out. Worse, you cannot inspect it ahead of time!
Third, you are likely to be bidding against flippers and builders who can more affordably rehab the home than you or I could do.
There are a lot of risks, so buyer beware!
- Bank owned or REO. REO means Real Estate Owned (by the bank).
These are usually listed on the MLS and if so, I can help you with it. Sometimes banks hold onto them between the trustee’s sale and prior to listing them with a broker. Often this is only for a month or two but sometimes it’s longer. If it’s not on the MLS, it’s very very hard, or maybe impossible, to buy it.
Want to buy a foreclosure? Want professional help to do so?
While it’s not hard to locate homes where owners have missed some payments, it should not be assumed that these houses are either for sale or that the owners have any intention of selling them. In my opinion, it would be harassment if consumers showed up on their doorsteps trying to purchase a house where a payment has been missed.
Most, maybe all, of the residents there would be offended. They may be trying to get a loan modification (it does happen, I’ve known people to work through it that way) or have family & friends helping them to get back on track. If it is not listed in the MLS (which you can find at MLSListings.com – the public portal of our agent multiple listing service), the odds are overwhelmingly against it being available to you.
The short answer to the question “Can a real estate agent help you to buy a foreclosure?” is that the answer is generally NO if it’s an auction on the courthouse steps.
What’s the difference between short sales and foreclosures? What is an auction?
See also these much older articles from the downturn:
So you think you want to buy a Silicon Valley short sale?
Short sales sell but often don’t close: why?
Browse Short Sale Listings & Bank Owned Properties for Sale in Los Gatos
Short sale and REO articles on the Live in Los Gatos blog (old articles)
Did you do the repairs outlined when you bought your home?
Recently I showed a home where the owners had been there 7 or 8 years but never did any of the suggested repairs from their pre-sale inspections when they purchased the home “As Is“. The As Is part means that no repairs were provided by the sellers, with the idea that buyers would do whatever was needed later. Desperate to get in when prices were appreciating fast, it seemed that most home buyers said “we’ll take care of it after we own it“.
But many of them forgot.
Today, with the whitest hot market I’ve ever seen in my career, most sellers fix the major items because they understand that it will net them a higher sale price. They fix the foundation, electrical, plumbing, waste lines, roof leaks, pest items, safety issues, and do whatever other repairs would make a buyer pause.
Some, though, don’t do any repairs at all – none! Often they are the same sellers who won’t stage their homes, or for whom scheduling a showing is a big effort, and maybe the disclosures aren’t so thoughtfully done. (In recent weeks I saw a disclosure package in which the sellers wrote on every page, “AS IS SALE” and refused to answer each question.) It’s a giant red flag that these may be difficult sellers.
If you want to maximize your profits, don’t let that seller be you. As Is certainly is the norm, but it’s As Disclosed. Wouldn’t buyers pay more if they weren’t worried about needing to do a lot of expensive and time consuming repairs? You bet. Confident buyers pay more. Let that be your mantra, home sellers.
Pull out your old file, find your inspection reports and review them, especially if you are preparing to sell your home
A kick out clause refers to language in the contract which permits the seller, in some cases, to cancel the contract with the current buyer. The current buyer is “kicked out” of contract. Another expression for the same idea is a “release clause” – the seller can release the buyer under some situations.
This is a bit of a surprise to most Silicon Valley home buyers, who tend to think that they can walk away from a property during their contingency time frames, but a seller is stuck with them, no matter what. That’s simply not true!
In the last few years, both the CAR and PRDS contract forms have been updated. Both now include language that specifies the seller’s right to cancel the contract. Both parties have rights and responsibilities. Failing to do what one has promised to do in the purchase agreement could potentially find that home buyer out of contract and without that home to buy. There are many shades of gray, and few things are automatic. If a seller is going to give a buyer the boot, there will be a “notice to perform” tendered first.
Let’s talk specifics. When can the seller kick out or release the buyer? (more…)
Mini update for Santa Clara County as a whole as of September 17, 2012 for houses in SCC:
Actives = 1295
Regular sales for sale = 1157 (89%
Short sales for sale = 95 (7%)
Bank owned houses for sale = 43 (3%)
Sold in the last 30 days = 859
Regular sales closed in last 30 days = 675 (79%)
Short sales closed in last 30 days = 151 (18%)
Bank owned houses sold in last 30 days = 33 (4%)
It seems that although short sales are in increasingly smaller part of the inventory of available homes, they are highly desirable and are showing up in the solds at twice their ratio of actives. Put another way, the absorption rate looks to be higher. Let’s check the math on the moths of inventory:
All houses in SCC: 1295/859 = 1.51 months of inventory
Regular sales in the county: 1157/675 = 1.71
Short sales in SCC: 95/151 = .63 moi (63% of one month!)
Bank owned homes: 43/33 = 1.3
All of these numbers are low, low, low – but the short sales are the lowest of all!
POST FROM APRIL 22, 2011:
Yesterday we looked at the types of home sales around Silicon Valley by price point. Not terribly surprising, most of the short sales and bank owned homes were in the lowest price ranges. Today we’ll look at this type of information not by pricing tier but instead by geography – in other words, by either town, city or district of San Jose (area). This post will not cover every area but will be a sampling a few communities, mostly on the west side of the valley (since that’s primarily where I work).
By way of reminder, the small image to the left reflects Santa Clara County’s houses for sale as a whole – all areas and all price points. (You can see the full sized image by clicking on it.) The green area represents “regular home sales” and the brick red and light orange signify distressed properties listed on the MLS for sale (red is short sales and orange is bank owned or REOs). Next let’s see a few regions within the county to see how things are faring geographically.
1. Almaden Valley area of San Jose – homes listed for sale by type – very few distressed properties on the market!
Almaden is a lovely southwest San Jose suburban community (zip code 95120) that grew up initially with the cinnabar or mercury mining activity. Today it’s an upscale area of more expensive homes than most of the county, it enjoys really good schools and scenic views of the coastal range as well as the Santa Teresa Foothills. Housing here is costly but residents love the quality of life. Since the cost of homes for sale here is high, it’s not super surprising, after seeing yesterday’s post, that there are very few distressed homes on the market here. Next we’ll check the other extreme…. (more…)
Silicon Valley home buyers (and sellers) are faced with a myriad of questions and choices when completing or reviewing residential real estate contracts to purchase the property. One of them, early on, is whether or not a particular day is chosen for closing escrow or if instead it’s a number of days from contract formation (acceptance) to closing.
Which is better?
The are pros and cons to each approach, of course. Many buyers want to be able to plan, without any ambiguity, when they will move in to their new home. (For some this can be a matter of feng shui, astrology or a sense that some days are more fortuitous than others.) This can work if negotiations are not protracted.
With distressed sales, though – bank owned properties (REOs) and short sales – and sometimes with multiple offers, the negotiations time frame can be hard to predict and if you pick one particular date, you may well have to change it later or find that you don’t really have enough time because a week or more gotten “eaten up” with counter offers, waiting for a bank or seller to respond or other delays. In those cases you may want to have the flexibility of writing in the length of escrow (number of days) rather than picking a certain date.
As always, talk with your professional real estate licensee for guidance as each case may be different.
In Silicon Valley, it seems the more expensive the neighborhood, the less likely it is that you’ll find a bargain. Saratoga CA home buyers who are working hard to get their feet in the door during this opportunity in the market (with low prices and even lower interest rates) are scrambling to find a creative way to make their budget line up with this high end enclave’s real estate prices.
One solution is to attempt to buy a distressed property in Saratoga – namely foreclosure or a bank owned (REO – real estate owned by the bank) house, condo or townhouse or a pre-foreclosure or short sale listing.
There aren’t many of them to choose from, which makes the few that do come available very prized by motivated buyers.
Below please find a list of all available distressed properties for sale in Saratoga, CA. This city has several school districts so if you are looking for one in particular, please contact me and we can chat about finding you that perfect home.
Note: some of the homes which have a “Saratoga mailing address” with a Saratoga, CA 95070 address actually belong to a neighboring city (or the county), such as Campbell. So you may see some homes in the list below which say Campbell, for instance. Want to read more about Saratoga and its neighborhoods? (I grew up there and graduated from Saratoga High many years ago…) Please also check out this article on my popehandy.com website: Saratoga Real Estate and Saratoga Homes for Sale”. Also check out the Saratoga California real estate market update post on this blog.
Check back frequently – this list is updated automatically!
The Silicon Valley real esate market is heating up but it’s not heating “evenly”. Some price points and areas (or school districts) enjoy a hot seller’s market while other segments are lagging. A big factor in the overall health of the realty market in the San Jose area is the percentage of listings which are distressed properties, meaning short sales and bank owned homes. Today we’ll see the ratios of these homes to the regular sales using graphs to get a quick visual take on the market trends and statistics.
Today we’ll look at homes listed on the MLS in all of Santa Clara County (including San Jose, Campbell, Los Gatos, Saratoga etc.) by price point. All of the graphs in this post will reference houses and duet homes combinesd(about 99% houses), not condos or townhomes.
Overall, it looks like about 1/3 of all homes for sale in the county are distressed sales. Next let’s look at this data by price point and then we’ll check it by area. The images below will be smaller but the colors will represent the same elements in each one (green being regular sales, brick being short sales and light orange being REOs).
A key ingredient in understanding how the Silicon Valley real estate market is faring is the ratio of regular sales to distressed properties on the market (Bank owned or REO listings and short sale listings). Today we’ll study Los Gatos and four areas or districts of San Jose: Almaden Valley, Willow Glen, Cambrian Park, and Blossom Valley.
First, let’s look at the county numbers as a general overview. In all of Santa Clara County, there are 3537 houses, duet homes, condominiums & townhouses for sale and available (“status 1” for my Realtor readers) on our multiple listing service. Of those, merely 1964 are “regular sales” (56%), 1105 are short sales (31%) and 375 are bank owned homes or REOs (11%).
Now let’s drill down to a few areas: Los Gatos, Almaden Valley, Willow Glen, Cambrian Park and Blossom Valley. We’ll check out the ratio of regular sales of houses and condos in each of these areas. How do these compare to the county average of 56%? Have a look:
This is helpful information for both home buyers & home sellers. Home sellers need to understand the challenges that come with selling in an area with more short sales or REOs, if they are in one of those parts of the valley. Or vice versa: if there are few distressed properties on the market, this makes it easier to sell (with less downward pressure on pricing). Buyers need to appreciate that they will have better luck negotiating in areas where many homes are being sold under some pressure.
A quick disclaimer – if we narrowed this study by school district and even neighborhood school, we might find that these “general numbers” are actually quite different at the hyper-local level. For example, if you visit a post of mine about the Los Gatos real estate market on my Live in Los Gatos blog, you’d find that when we separated out the various school districts, and even price points, the ratio of distressed properties and their absorption rates change very dramatically. To see those, scroll down until you see the blue and yellow boxes.
The condo market in San Jose and nearby areas has taken a beating throughout our downturn. Even so, condos in Los Gatos, Almaden and Willow Glen are faring pretty decently.
Now let’s hone in on each of these five areas and the two main housing types to see the ratio in each of regular sales, short sales, and REOs.
It seems like a simple enough question: “how long does it take to buy a home in Silicon Valley?” (Not how long to find the perfect house or condo, but how long from the time the offer is accepted until the sale is finalized and you can move in.) The answer has a few factors which can swing the outcome one way or the other, making the escrow time frame short or long.
Variables that make home buying faster or slower:
- whether or not the seller has pre-sale inspections (with a short sale, usually not)
- whether or not the home is a condo, townhouse or PUD (and if so, if the HOA docs are available upfront or are only ordered once the offer is accepted)
- whether the buyer is only pre-qualified or fully pre-approved for a loan
- the amount of cash down – an “all cash offer” can make the sale very, very fast
- the loan type – an FHA loan will need more time to be processed and the sale will close slower
- the contingencies involved and their time frames as written in the contract
- the sale type: regular vs short sale
- buyer needs or seller needs unrelated to the transaction: they can agree on a somewhat longer escrow in the contract (purchase agreement) if so desired
- if it’s a special type of property, such as a luxury home or estate OR a mountain property, there may be additional inspections needed and it could take a little longer to close on these as well
The fastest home sales I’ve seen are the all-cash offers of houses (not townhouses or condominiums) in which the seller already has excellent home inspections (my fastest listing that sold: 5 days, all cash, buyer HAD to buy within a week or would suffer enormous tax penalties). (more…)
What is the difference between short sales and foreclosures? Do you know what an auction is, or what REO means? These are some basic terms related to distressed properties or financially distressed home owners, and we’ll go over what each of them means and why they matter.
Here is the quick summary on the difference between short sales and foreclosures (and all the rest):
- When home owners miss a payment or two, their lender will record a “notice of default” on the property. This is pre-foreclosure.
- A short sale happens most often after payments have been missed, but not always. If the home is worth less than the mortgage, then for the sale to be completed the lender must agree to a short payoff. The seller cannot take a penny from the proceeds of the sale.
- If property owners don’t make up the missed payments, interest, and fees for being delinquent, the lender will then record a “notice of trustee’s sale”.
- The trustees sale is the next step after a foreclosure notice. It’s an auction. Usually it will happen on the steps of the county courthouse. Buyers can purchase it then only if they pay ALL CASH. There are no guarantees that hidden liens from the government may still be owed. The future home owner may be stuck with them! (All other debts are erased.) You cannot get title insurance on the day you buy a property at auction. If the property is occupied, you may need to evict the tenants or former owners.
- If the home is not sold at auction, next the bank takes back the property and then markets it for sale with a real estate licensee, it’s sold as an REO. REO stands for “real estate owned” by the lender. REO sales do not always have presale inspections and may or may not be cleaned up to be more presentable.
Bargain hunting: short sales, foreclosures / auctions, and REO purchases
Silicon Valley home buyers who are looking for a good deal can’t help but notice that prices on short sales and bank owned homes are a bargain compared to regular sales in the San Jose area. But what exactly ARE they? What’s the difference between a short sale and a foreclosure? What are the risks involved in buying one of these in Santa Clara County? Today we’ll have a look at the various types of distressed properties and the risks associated with purchasing each.
The difference between short sales and foreclosures?
The difference between short sales and foreclosures is sometimes partly a matter of where they are on the time line. We’ll discuss the first stages in this process next.
What are short sales?
Short sales are when home owners need to sell their home but there’s not enough equity in the property to pay off the loans and closing costs. So the only way they can sell is if the bank agrees to accept a “short payoff“. The bank or banks get paid in short, hence short sale.
Often short sales are pre-foreclosures, meaning that the owners have missed some payments and the bank is working toward foreclosure proceedings on the condo, house or townhouse. But not always! Sometimes short sales are not pre-foreclosures. In those cases the owners have made all their payments but can foresee not being able to do so in the future (example: someone knows that he or she will be losing his/her job very soon, or that large medical bills are coming etc.). (more…)