Can a real estate agent help you to buy a foreclosure?

San Francisco Victorian Homes - Can a real estate agent help you to buy a foreclosure?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

  1. 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).

  2. 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!

  3. 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.

Related reading:

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)

 

What Is Title Insurance and Who Pays For It?

Title InsuranceTitle insurance seems to be a mystery to many home buyers and sellers, so I want to give an overview on it in this post.  We’ll discuss what it is, why it’s needed and when, and also who pays for it. (For the difference between title insurance, home warranties, and homeowner’s insurance, please see another post on this blog: Homeowner’s Insurance, Title Insurance and Home Warranties.)

What is title insurance?

The purpose of title insurance is to protect against loss of ownership of the land, condo, house, estate, or other real estate due to a problem or defect with title. The loss could be complete (losing the property entirely) or partial (losing a portion of ownership or use). It may also include a financial loss, whether direct or in terms of future market value of the property. A company providing this type of insurance is called either a title company or a title insurance company.

Sometimes the loss could be as a result of a “defective recording” of a document, an improper signing of a document, or much worse, forgery or signing under duress (being forced to sign under undue pressure, such as by blackmail).

Loss of title can also result from hidden heirs who may claim a partial interest in the property.

If there’s a recorded easement that the title company does not find when a home is sold, and the buyer is surprised by it after the closing, that title company may be writing a check to the new owner for the loss incurred in market value due to that easement, which should have been found.

Another type of loss would be if someone claimed an unrecorded easement, which might cause a “partial loss”. When the title is somewhat in question, or considered “not clear”, it is often said that there is “a cloud on title”. What you want, though, is “clear title“. You want to know that no one else will have any kind of right or claim to the property: not a lienholder, not the IRS, not a contractor, not the county tax collector or anyone else.

Title insurance covers smaller issues too, such as finding out later that a major component of the home has a building permit violation.
(more…)

Silicon Valley Home Buying Tip

Newer Silicon Valley Home in Blossom Valley

Are you house-hunting in Silicon Valley? If so, you may be viewing homes which were last sold just a few years ago. This is especially true among distressed properties which were purchased, renovated and now are being flipped (foreclosures, REOs, short sales). Most sales are reported on the multiple listing service, so it’s easy for your agent to find this information for you. If there’s nothing on the MLS, a quick look at the county records online will reveal the last sale date.

Why does it matter if the home sold just a couple of years ago? Because it may be possible, when you are buying such a property, to request the old inspections and disclosures. If the current sellers are using the same agent who helped them to buy the home (which is also learnable from the MLS), he or she should have a copy of the old file. State law requires that brokers keep transaction records for 3 years. Sellers and agents tend to keep them for longer, though. (When agents change brokerages, though, sometimes it’s harder to get ahold of old files.)

So back to your Silicon Valley real estate issue. You’ve located a home that you would like to buy, and there has been some recent remodeling done, “permits unknown”. By requesting the old inspections, reports, and disclosures, you may learn the true status of that repair work. Perhaps the current owner doesn’t remember, and doesn’t think to look at the old paperwork, but by going through it yourself, you may gain a clearer understanding of the nature of those improvements. Or you may find out that an addition or remodel was done without permits.

Knowledge is power, and by requesting the information on a home where it was sold in recent history, you gain some of each.

 

 

 

What’s the Ratio of Distressed Sales – Short Sales or Foreclosures – to “Regular Sales” in Santa Clara County?

Right now there are about 4664 active residential real estate listings (homes listed for sale on our local MLS) which are houses, duet homes, townhouses or condominiums in Santa Clara County.  Of those, there are 1255 short sales (27% of the inventory) and 463 bank owned properties, or REOs (9%),  on the market.  So the “distressed properties” segment equals 37% of the Silicon Valley real estate market (or Santa Clara County real estate market).

Some areas are flooded with short sales & bank owned homes. Others are going through this meltdown nearly unscathed. Below please find a sampling of areas in and around San Jose with the percentage of distressed homes for sale (including both short sales and REOs or bank owned properties).  In most areas, there are usually about 3 times as many short sales as bank owned homes, but sometimes it’s a lower percentage, closer to 2.5%.   I pulled the numbers from our MLS tonight – info is deemed correct but of course not guaranteed.

Percent of Distressed Home Listings in Parts of Santa Clara County
Figures represent houses, duet homes, townhouses & condos for sale
South County (Morgan Hill, Gilroy, “area 1”43%
Santa Teresa (area of San Jose, “area 3”)44%
Central San Jose (downtown & nearby, “area 9”)51%
Palo Alto2%
Saratoga4%
Los Gatos (town of, zips 95030 & 95032)12%

What is a Short Sale, and Who Qualifies For One?

Recently I have received a number of emails and calls from San Jose and Silicon Valley homeowners who are “upside down” in their homes and want to sell that property and “move up” into a bigger house, better neighborhood, or higher performing school district. They contact me to see if they can do a short sale and get out from under their loan, and several seem to think that they can pull equity out from that property to purchase the next home.

It doesn’t work that way.

There are a lot of misconceptions about short selling a home, and what a short sale is, and who qualifies for a short sale, so this post is aimed at clarifying what it’s all about.

short sale signsA “short sale” is a sale of the property in which the lender (or lenders) accepts a “short payoff” to get the home conveyed to the new owner. The “short” in short sale refers to the lender not getting paid back what was promised by the borrower/homeowner.

Why would a lender agree to taking less than what is owed? The answer is simple: only if it’s the lesser of two evils, the other being a foreclosure (which would cause a greater loss to the lender in most cases).

Under what circumstances will a lender agree to a short sale? There are a few conditions which absolutely must be met if a seller will even consider a short payoff:

  1. The homeowner has some sort of significant hardship (such as the death of a spouse and loss of that spouse’s income, divorce, job loss, serious medical illness with large medical expenses)
  2. The monthly payments can no longer be made (in part or in full)
  3. The owners or property does not qualify for a loan modification
  4. The property owner has no other assets which could be sold to make up the difference between sale price and loan balance (such as a vacation home, stocks, etc.)
  5. In many cases, lenders will not consider a short sale unless payments or parts of payments have been missed (the owner is in or near default status)

A few very significant ramifications occur when there is a short sale:
(more…)