This week I was emailed about a home mentioned on Trulia which seemed “too good to be true”. It was a distressed property and the reader thought it was for sale for about $650,000 but it is in an extremely upscale suburb on the Peninsula and she could not find the home for sale on our MLS. She didn’t want to pay to find out if this was a hoax or what, so she asked me to please have a look.
I clicked on her link and saw that it was a feed into Trulia from one of the companies which provides foreclosure information to consumers by paid subscription. No where did it say the home was for sale, but instead it indicated that $650,000 was the home owner’s loan amount – and that the property had a Notice of Default filed against it. The house wasn’t worth anywhere near $650,000, of course – instead it’s valued at more than $2,000,000. (So this would NOT be a short sale – there’s tons of equity in this property.)
Some consumers think that if a home has a NOD, it is for sale. That is simply not true. Many homeowners (including some of my clients) have at times missed a payment and then found themselves scrambling a little to get caught up. It’s not easy but it can and does happen sometimes.
Now imagine yourself as that homeowner with a Silicon Valley house you love but that you’ve had some trouble with late, partial or missed mortgage payments. You are trying to keep your house but someone comes to your front door and thinks your home can be bought for the amount of the loan or the delinquencies or both. I’ve seen million dollar homes in Los Gatos with a very small second loan, such as $20,000, that went into default. You’d be seriously misguided to think that homeowner will part with a $1 million home for the $20,000 that is owed. Just because the seller is behind doesn’t make the seller stupid!
Some of these sites which sell foreclosure info to consumers do both them and the home owner a great disservice by implying that condos, townhouses and houses which are in pre-foreclosure are available for purchase. If the owner wants to sell, the property will be listed for sale with a real estate agent or broker, or at the very least there will be a for sale by owner ad found on Craigslist or a sign on the front yard. Show up on that struggling owner’s front porch and ask to buy the house at a crazy low price and you’re just throwing salt on the wound. Don’t do it.
For further reading on distressed sales, pre-foreclosures and short sales:
Q & A on short sales (popehandy.com website)