This question is one of the most asked questions I get. Since it is obviously a hot topic right now I feel obligated to share what I know about foreclosures and the process of buying them.
Step 1: Finding a Foreclosure - This part is pretty simple. Most banks, once they foreclose on a home hire a local real estate agent to list the home in the MLS. Most MLS's are auto-populated to major sites such as Realtor.com or even my site for the Orange and L.A. County MLS. On all the major sites you can search by foreclosures as one of your parameters. You can also go to bank websites like Countrywide.com to find the homes that they have avalible.
Step 2: Seeing Foreclosures - Call a local agent and they will get you in.
Step 3: Qualifying for a Foreclosure - Most of the banks that own these homes require that you qualify for a loan with them before you make an offer. So if Wells Fargo owns the home then you will need to qualify with Wells Fargo before you submit your offer. You do not necessarily have to ultimately get your loan from Wells Fargo but you do have to be qualified by them. A easy way to do this is to get qualified by a "loan broker" who on your behalf can talk to these individual banks and supply them with all the documentation they need to qualify you. If you do it this way the process goes very quickly.
Step 4: Making your Offer for a Foreclosure
-The home is 99% of the time sold in "as-is" condition, so make sure you write it in on your offer and understand what that means.
-Expect to put a deposit of at least 3% down to open escrow.
-As stated before you will need to be qualified by the bank that owns the home and submit a "pre-qual" letter from that bank with your offer.
-Have proof of your down payment available. i.e. bank statements
-Expect to pay the asking price, at least that is true for Southern California. Bids that are under the asking price get thrown away and don't even get a response. (Of course there are exceptions to the rule, but they only prove the rule)
-Move very fast on these homes, they are in big demand and short supply. (many people will disagree with this, but the numbers have convinced me this is true) In SoCal 10% of our market are foreclosures which are generally priced below the competition. Everybody that is buying right now wants the best deal and are all going after these foreclosures. It becomes a simple case of the demand for foreclosures out paces the supply of foreclosures.
Step 5: Closing Escrow - The process is no different than a traditional sale. You will have contingency's for your loan and inspections in place so if you are not happy with the purchase a few days into it you can cancel and get your deposit back. Unless you agreed to something that says you have no contingency's and your deposit is non-refundable.
Well I hope that this has answered your question and thanks for reading.
Blog you later,
Brent DeWitt
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