What can I do with a (pre)foreclosure sfr in Washington?

19 Replies

Hello everyone! 

Can I buy a house that is pre-foreclosure? 

Can I buy a house that is in foreclosure?

Is there a difference between in foreclosure and foreclosed on?

I assume I can still buy a house that is pre foreclosure from the owner. How would I do that? 

Thank you!

same way you buy any house.. write a contract open escrow at your favortie title company they will get the payoff demands in you cut a check and you close..

Collin, Jay's right.  It isn't too much different.   The only "tricky" part is finding them and, sometimes, negotiating.  Banks don't negotiate on price as much as they used to, but you can still get great deals.  

Foreclosure is a process and once you're foreclosed on that means the foreclosure action has been completed and that it sold at auction to a 3rd party or became a banked own home. You need to get in contact with the owner of said property to have a chance at purchasing a home that is in foreclosure. If it's a short sale or if the foreclosure sale date is too close to allow one to close then other actions may need to be taken to facilitate the transaction. 

That easy haha makes me feel like I asked a stupid question. But now I know. 

So @Brett Goldsmith if the house in question has a scheduled auction date then it has been foreclosed on? Is going to the auction the only option at that point?

Thank you everyone for your response.

If its a bank auction, don't expect much. 

If its a tax foreclosure auction, be careful as you are not allowed to use the tax foreclosure list as a means of getting or soliciting sales.

Hold up just a minute. 

In Washington State, there are distressed home consultant laws and if you afoul of those laws you can be fined into an oblivion and possibly be looking at some jail time. If you going to pursue those types of deals, you better know what the law says and how to avoid any issues? The link is down below:

http://app.leg.wa.gov/rcw/default.aspx?cite=61.34&...

@Collin Savunen "Foreclosed on" means that the foreclosure has happened and that the title of the property has been transferred to a 3rd party or a lender. The trustee sale is the procedure by which a lender is allowed to enforce his rights to collect on the debt. Before the trustee sale happens (pre-foreclosure), the borrower is the owner of record and may sell the property just like he would if the owner was not in FC. However, if he owes more than the home is worth (underwater), he needs to get permission from the lender for a short payoff (shortsale) in order for the lender to release his lien so that the title company can close the transaction. The lender may or may not agree to this. After the foreclosure, the 3rd party or lender will get a Trustees Deed that they will record and become the new owners of the property.

@Jim L.  . google "Joe Kaser" - its a fascinating read.

Most tax sale lists from the county will have some legal stipulation regarding the relevant RCW.  @Kevin Romines covered it pretty well.

If its on Zillow, its a bank foreclosure or pre-foreclosure and totally legit for you to check out and offer on.

@Gabe Hall   I have read the Kaiser case, and the relevant RCW sections.  Unless I'm missing something, the Joe Kaiser case says nothing about illegality in using tax foreclosure lists to identify pre-foreclosure properties and contacting the owners in an effort to *ethically* aid their situation.  Kaiser and his partners systematically violated consumer protection and other laws by, among other acts, falsely promising distressed homeowners they'd save their homes, then instead taking ownership and permitting foreclosure sale to proceed, and hiding overages on the tax sales.  I.e., Kaiser et al. overtly hurt homeowners rather than help them, putting them in a worse situation than if they'd lost their homes in the tax sale.  Reliance on the ignorance or naivete of homeowners to profit thereby is obviously and egregiously wrong, even when not explicitly prohibited by black letter law.

However, unless I am much mistaken, there are plenty of ways (particularly in today's seller's market) that an investor or RE agent could actually help distressed homeowners--within RCW 61.34 and the Consumer Protection Act (RCW 19.86)--and still make a profit.  

Originally posted by @Kevin Romines :

Hold up just a minute. 

In Washington State, there are distressed home consultant laws and if you afoul of those laws you can be fined into an oblivion and possibly be looking at some jail time. If you going to pursue those types of deals, you better know what the law says and how to avoid any issues? The link is down below:

http://app.leg.wa.gov/rcw/default.aspx?cite=61.34&...

 Kevin, in your opinion (obviously not legal advice), what are the definate do nots in buying preforeclosures? What are the potential work arounds?

I would still like to help people and make a profit, but the WA laws have me scared. 

Seems to be a lot of different opinions on this thread. 

@Ryan Garrison in the last couple of years I read up on the laws, so my memory may be a little rusty by now, but here is what I remember. If you are buying via real estate contract from a distressed seller and you default on any of the payments within the first 2-3 years, they can and will nail you. If You buy the home for to much of a discount from real market value, they can nail you. If you lease back the home to the original seller they can and will nail you. You are deemed a distressed home consultant if you work with any of these homes and sellers and therefore have a fiduciary duty to the seller. 

I would recommend that you read the actual text of the law, and then consult an attorney with this specialty as their expertise. Washington State isn't playing around on these deals.  Just to give you an idea of how concerning this issue is, they have language in the law that says anyone that is in default or is showing signs of going into default, such as someone is 30 days late on a mortgage payment. Now how is the average person going to know if that's the case? They can ask the seller, but is the seller really going to tell them? In the wrong situation, they don't tell you, you do a deal with them and later after the deal is closed the state of Washington comes down on you due to a complaint that the seller files?

To me, I see way to much liability to even consider playing in this arena. I would stick to deals that don't involve someone in distress?

Originally posted by @Gabe Hall :

@Jim L.  . google "Joe Kaser" - its a fascinating read.

Most tax sale lists from the county will have some legal stipulation regarding the relevant RCW.  @Kevin Romines covered it pretty well.

If its on Zillow, its a bank foreclosure or pre-foreclosure and totally legit for you to check out and offer on.

Joe Kaiser is a legend  he went toe to toe with the WA AG.. his thing was buying tax overages from those who did not realize they had them.. there is a big company in CA that did that as well..  they called me one day.. my family owns a lot of old odds and ends properties that were left over from developments my dad did in the 60s and 70s.. well one became valuable it appears and this company from CA calls and says we found money for you . ( they call my mom who was 80 at the time ) she calls me.. I say it can only be one place I call up to the Lake co tax collector and sure enough little under 10k waiting for her.. so I claimed it.. 

this is the risk that many take trying to do overages.. and then the counties really got tough on these and simply did not like private investors taking half of old owners overages.. so they stopped or made it difficult for Joe's students to do this.

WA AG just went bat  $$$$ on him.. and so yes its a good read.

Originally posted by @Kevin Romines :

@Ryan Garrison in the last couple of years I read up on the laws, so my memory may be a little rusty by now, but here is what I remember. If you are buying via real estate contract from a distressed seller and you default on any of the payments within the first 2-3 years, they can and will nail you. If You buy the home for to much of a discount from real market value, they can nail you. If you lease back the home to the original seller they can and will nail you. You are deemed a distressed home consultant if you work with any of these homes and sellers and therefore have a fiduciary duty to the seller. 

I would recommend that you read the actual text of the law, and then consult an attorney with this specialty as their expertise. Washington State isn't playing around on these deals.  Just to give you an idea of how concerning this issue is, they have language in the law that says anyone that is in default or is showing signs of going into default, such as someone is 30 days late on a mortgage payment. Now how is the average person going to know if that's the case? They can ask the seller, but is the seller really going to tell them? In the wrong situation, they don't tell you, you do a deal with them and later after the deal is closed the state of Washington comes down on you due to a complaint that the seller files?

To me, I see way to much liability to even consider playing in this arena. I would stick to deals that don't involve someone in distress?

exact same laws in Oregon as well..  these laws put us out of the foreclosure rescue bizz when they were enacted in 08 ish..

the tough part for me at the time was getting the state of Oregon to give clear thoughts on who is a foreclosure consultant. 

it boiled down to licensed broker  Lawyer and lender  could assist in helping them.. NOT investor looking to profit.. :)  

And prior to the law being enacted we actually got turned into the AG for a deal we did in Vancouver.. you talk about pain.. they send a supina and want copies of every deal we did in WA for the last 3 years.. regardless of how we got them.. at the time we were buying at least 50 houses a year either through pre foreclosure or court house steps..  the coping bill and shipping it to the state was a few grand alone.. then the worry.. and of course they never send you a letter and say don't worry about it you did nothing wrong.. you just never hear from them.. as was our case.

you violate these today.. and you get turned in your in trouble.. but national how too books and courses etc will not warn of specific state laws.

WA CA and OR have these.. laws.. 

Check out NWMLS Form 22FSBO and potentially utilize as CYA with any direct sale in WA, distressed or no.

We received notice from a 'headhunter' of an overage held by CO from a sale in '05.  We claimed it ourselves after finding it online because their fee was 33%. Took about 8 months but got our $688 back.  It's a thing.

@Jay Hinrichs very good advice. Thank you for your insight.

@Kevin Romines Thank you for your input as well.

The last time I was looking at pre-foreclosures was 2011 or so. I got out of RE for a while, and when I start digging into it again there are all these new scary RCWs to worry about.

I had heard an attorney or RE agent needs to be part of the transaction.  To what extent, I guess I need to talk to an RE attorney to find out more.  My un-lawyerish instinct makes me think that if the attorney had the seller sign a document that said they understand that they "may" be able to sell the home with an agent for more money that it might make a transaction doable.     If there is a "safe" way to perform the transaction, there would be a lot less competition than there used to be. Maybe it is just my car business background...always looking for a workaround.

Originally posted by @Steve Vaughan :

Check out NWMLS Form 22FSBO and potentially utilize as CYA with any direct sale in WA, distressed or no.

We received notice from a 'headhunter' of an overage held by CO from a sale in '05.  We claimed it ourselves after finding it online because their fee was 33%. Took about 8 months but got our $688 back.  It's a thing.

the other thing i got.. there is some obscure office that holds money in oregon.. like when bank account closes and they cant find anyone. they send it to the state.. and in oregon its some thing like the division of mining  something crazy like that.

but I checked in and sure enough when i sold my big house.. there was impounds and they mailed it and it never got forwarded so about 5 years later I stumble in it.. just over 8900 .  dollars.. got it in a few weeks.. just had to have ID and a notarized statement. 

I am sure there are folks that are looking to see what monies are there.. then trying to skip trace and claim a finders fee.

As for buying pre foreclosures.. the other issue in Oregon was that if you resold it within a certain amount of time you owed the old owner back 80% of what you made..  so for long term buy and holders like you I think you can just make a cash or finance offer. and your good.. hold it till the profit split sunsets.. and there you go.. as you know we never held anything very long.. so this money back to the seller further put us out of that niche of inquiring properties.  the 80% to seller was Oregon law.. not sure in WA.