How do purchase a foreclosed home?

Question

Im moving to Austin and housing is so expensive I figured this would also cause some homes to foreclose as well, but i see things like pre-foreclosure, shefif, foreclosed. What do these terms mean and what should i look for as well as where do i begin?

Marcus Auerbach · Answer

There are almost no forclosures anymore - they only happen when people owe more than the house is worth. With recent home value gains that does almost never happen anymore. Pre-FC are a joke - thats simply when someone fell behind on payments. If they can't resume they will just list and sell, take the money, save their credit score.

Forclosures are listed on MLS. I see one maybe every 3 months.. they used to account for about a third of all sales 12 years ago.

Marty Boardman · Answer

Call it what you want, that's the term most often used by real estate professionals I know. And door knocking is not the only way to do it. I leave hand written letters on the door, text message and reach out to friends and family to make contact with the owner. There is rarely any confrontation. Most homeowners I meet are relieved to have someone they can talk to that can educate them on how the process works, even if they don't want to sell.

Yes, buying at auction is risky but there are ways to mitigate this risk. The bank's bid is equal to the outstanding principal balance due on the loan, plus legal and late fees. They can't set the bid any higher than what is owed to them. So if this amount is far less than the value of the house it's safe to bid. And you can get a title report prior to the auction that will reveal any outstanding liens. If the first lien position holder is foreclosing all junior liens get wiped out. There are situations to avoid, for example if the IRS or state has a tax lien on the property. But even then you can plan accordingly and still buy the property for below market value. You'll just have to wait out their redemption periods.

As for needing cash, in Wisconsin you only need 10% of the winning bid on the day of the sale. The rest is paid after the confirmation of sale hearing takes place, which usually isn't until 30-60 days AFTER the auction takes place. That's more than enough time to get a hard money or private loan to fund the purchase.

Marty Boardman · Answer

Each county sheriff's office has their own website with a link to the notice of foreclosure sale document (usually a PDF). Some counties are better at it than others but you should be able to get the info you need directly from these sites. I wouldn't trust a third party to obtain this information. I've found their data is old, missing, or inaccurate.

Marcus Auerbach · Answer

Pre-forclosure is not a real thing, it's simply a person who is behind on their mortgage payments. The only way to buy a pre-forclosure is to knock on the door and confront the owner - the reaction is mostly unfriendly.

You can buy a property at the sherriff sale - you will have to bid against the bank (represented by an attorney), pay cash and you are buying not only the property, but also any liens (debt) that is recorded against the property.

I would not recommend that for someone who is getting started!

Banks have learned in 2012-2013 that they are loosing money selling deals directly to investors (some of my best purchases personally, wish I could go back) and started to list on MLS for maximum exposure and highest possible sales price.

Ryan Fultz · Answer

@Marty BoardmanAre you using particular websites for foreclosures in WI? I'd love to know more about how you are going about acquiring these properties. Thanks in advance!

Marty Boardman · Answer

I agree Marcus that there are few bank-owned foreclosures listed on the MLS. But there's still a lot of opportunity for pre-foreclosures and at auction. I bought four houses last month at auction in Wisconsin and 1 pre-foreclosure. I just checked with Milwaukee county and there are 66 foreclosures scheduled. Waukesha County has 12. If you're willing to travel a little further there are foreclosures in Racine, Washington, Kenosha and Dodge counties.

How do purchase a foreclosed home?

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