Foreclosure in Massachusetts

[Jenna Banaitis]

There are so many homes in my area that are foreclosed on and going to auction? Is this the same thing and what are the terms with buying one of these? Could you contact an owner, before auction and negotiate a sales price?  

[Douglas Snook]

I will give you a quick simplified over view. The process can vary by state.

When a bank/lender is not paid on the mortgage/loan after a certain amount of time, they will declare a default. To recover the money loaned they will move to foreclose on the property. This is usually done by advertised auction. Generally anyone can bid at the auction and the announcement will set out the terms (be present with a $10,000 check  to be eligible to bid, no inspections, close in 30 days etc.)

Most cases, especially if the value of the house is less then the mortgage/loan the bank is the high bidder and takes title to the property. A deed and other documents are filed at the registry of deeds. Now the banks wants money/cash not real estate. They usually turn around and sell the property. Some times they list it with a local real estate agent just like you would if you were selling your home. Other times they will auction the property through sites like HUBZU. It may go for auction several times until their reserve is meet.

If someone other then the bank is the high bidder at the foreclosure auction then they own it. Any amount over what the bank is owed (plus various fees of course) is given to the former home owner.

You asked about contacting the home owner and negotiating a sale. Yes it can be done but it can be difficult to work with the bank to stop or postpone the auction. Just because you have a P&S signed with the owner may not be enough. The bank is going to want to be paid in full for what they are owed. You would have to try to convince them that it would be better to have the owner sell then have it go to foreclosure. The bank will have their own appraisal done for starters. They may require you to work with their own favorite local broker.

Hope that answered your questions to some degree. Feel free to contact me if you want a further explanation.