Foreclosure Sales - Chance Or Risk?

Certainly you must have heard of "foreclosure sales", houses from forced sales. How worthwhile are these properties and what in particular needs to be kept in mind? Are these the "super deals" that everyone is on the lookout for?

We would like to provide you with a little background information in order to shed some light on the steps involved in a foreclosure sale on the one hand, and to reveal some of the potential dangers for you as a real estate buyer on the other.

The cause of the crisis in the real estate market is based on the fact that until 2006 there was a building boom especially in Florida. Real estate prices were headed only one direction and that was up. A lot of "little people" also tried their hand at real estate speculation. In addition, it was not particularly difficult to obtain credit and the properties were mortgaged by the banks sometimes with astronomically exaggerated values. After the real estate bubble popped, these investors stood and still stand hopelessly indebted with mortgages that are frequently higher than the actual market value of the property.

If a real estate property owner is in arrears for more than 90 days, the creditor bank initiates a foreclosure sale. In order to avert the threatening foreclosure, the property owner can first of all try to sell the property as a "short sale". If he does not succeed in finding a suitable buyer or if the mortgage is significantly higher than the actual market value of the property, the last step out of the misery is the forced sale of the Florida real estate property after approximately 6 months.

One of the first events of the foreclosure process is the property being advertised up for public auction and the bidder with the highest offer gets the sale, if he also fulfills all of the remaining requirements. The starting offer is set by the credit lender and as a rule, corresponds to the remaining mortgage sum plus any outstanding property taxes and other costs. After the forced auction the property is transferred into the possession of the buyer.

If the property does not find a buyer at the public auction, the credit lending bank becomes the new owner. The bank will now try to sell the property itself as a "bank owned property" (also frequently referred to as "real estate owned" - or REO for short). The bank can now lower the sales price in order to sell the property on the free market. The previous home owners can remain in the house until it has been sold either at the forced auction or as an REO. The previous owner is informed in writing of how long he has to vacate the premises, usually the local sheriff ensures that this deadline is kept.

Foreclosure sales are generally only suitable for absolute professionals. The properties being auctioned are publicly advertised, but lists also circulate on the internet as well. Because these kinds of transactions have to be negotiated by the interested parties themselves without the assistance of a real estate agent, there are no property photos, price evaluations, certificates or additional information. In order to avoid large financial losses, the banks often bid on the auctions themselves through their own attorneys.

As a result, it is very hard to make a great deal. It is also made more difficult by the fact that your hands are tied in terms of obtaining important information about the property. Because many real estate properties are still inhabited, it is frequently only possible to view the property from the outside while the condition inside is concealed. It is equally difficult to obtain an inspection certificate. As a rule, these kinds of properties are sold without any guarantee, "as is". Due to the reason that these real estate properties have been auctioned because of financial problems, the maintenance condition is often not good. Possible repairs or restoration measures must be paid by the buyer out of his own pocket. The sales price of a foreclosure property must be settled in cash because, lacking guarantees or certificates, such properties will not be financed by banks.

For these reasons, real estate properties that have reverted to the bank at the forced auction and are now listed in the MLS system are significantly more interesting. There are still generally no guarantees with regards the condition of the property, however the properties can be viewed normally and the previously unrealistic process have been reduced by the banks to a much more reasonable level.

Properties that are actually being offered at a price below the regular market value are frequently sold within 48 hours! So you see that the real deals are in the "bank owned properties" (REOs). Contact us today, we will gladly make you an appropriate offer.

 

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