Private money and foreclosure

[Kim Swidarski]

Hi. Completely new. Never done before. I have a house that’s been vacant for  about a year. Owner died. Bank took possession of it. Most likely going into foreclosure. What I’m wondering is can I get a private money lender and go to an auction and bid on a foreclosed house? Or if it doesn’t go to auction but is a foreclosure can I get a private money lender for purchase? 

[Jeff S.]

There seems to be some confusion here, @Kim Swidarski. If the bank took possession, as you mention, then the foreclosure is over. The high bid did not achieve the minimum set by the bank and now they own it as an REO.

When some say they either buy or lend on foreclosures, they are not always clear since most of the time they really mean REOs. Very few lenders will provide money for a foreclosure sale because the funds are unsecured.

Many states, including Florida, require immediate payment at the end of the auction. In California, for example, the high bidder must immediately produce cashier’s checks for the successful bid amount. These could total hundreds of thousands of dollars or even millions. At that point you will not yet have title to the property and the lender will not have a secured loan through a recorded mortgage. What lender would hand you a million dollars in cashier’s checks without either a recorded lien or a commitment to record from a title company?

If the bank, in your case, owns the property as an REO, you could approach them, but I can almost guarantee they will tell you to take a hike. They will sell when they are ready, and it will likely be through an agent and an MLS listing.