What is the process for buying a foreclosure?

Question

Hi all,

Does anyone purchase foreclosures? What is the process? I'm from Canada where we don't really have foreclosures so I'm curious what the process is.Do investors typically stay away from these?

Chris Seveney · Answer

@Erika Geoffrey

One thing not mentioned is to review title prior to bidding on a foreclosure. You need to know what your bidding on (google man buys strip of land at foreclosure). The loan also could be in second position or the state may have hoa liens take a super priority

So there is more to just bidding on it at foreclosure. You need to learn how to do the due diligence to make sure you understand all factors involved (as well as is property occupied). If occupied then you will eventually need to evict

Chris Martin · Answer

Along the lines of what @Chris Seveney posted, the "true foreclosure" process for most states in the US is a legal process that generally is best left to attorneys or well educated investors. Yes, a non-attorney investor can "play" in the foreclosure arena, but I highly recommend learning the applicable state laws in whatever state you play. For BP Nation in NC, just read and fully understand the 97 pages in Chapter 45 of the NC General Statutes as a start.

BTW, most people call REOs foreclosures. They are not the same animal. Also, there are very few foreclosures in the pipeline. I've bought dozens of properties from the courthouse steps, but none in the past seven or eight years as I posted about in this BP post. The 'foreclosure discount' in 2008 to 2011 (post Great Recession) was generally 20%-40% in urban central NC and now is minimal, like 0%-10%. Other areas of the country will have different values, some places like San Jose saw minimal foreclosure discount even in the 2008-2011 GR era.

In my investing career, prepping for the bid was about 98% of the work. I walked into the courthouse with my entry and maximum bid written down. All the legal and leg work (title search, SP file checks, double checking with paralegal help, self PCR, on and on...) was done. When I bid, frequently no other bidders were there. Now, almost every file has an upset bid. My focus was on creating equity, so why bother if bids pass your maximum? When AMH (American Homes 4 Rent) entered the market over 9 years ago, I knew my career was over.

So, I guess to conclude... I say good luck at the courthouse! You probably will need it!

Joseph R. Smith · Answer

@Erika Geoffrey I've bought mostly on market REOs and a few on market HUD foreclosures and VA foreclosures. The process the listing broker and atty who did closing paperwork didn't really stand out at all from otherwise. At real low price points (under $50K or under $30K) most are cash only deals where they need so much rehab inspections are frowned upon in practice. But the better ones are out floating all around out there on market at slightly higher price points. Ive gotten conventional local bank financing on such without noticing much difference.

Erika Geoffrey · Answer

Thanks for your input! I am definitely not going the foreclosure route, I’m not at a stage to tackle Reno’s as a foreign investor. more just curious to the process and why I never hear of investors buying these.

Your explanation really answered that question, thanks!

Dwayne Poster · Answer

You can find them both on and off market.

On market is a wash with Realtors fees and competition. Once an acceptable offer comes in, it goes before the court, who will accept all offers, and award to the best. Off market is the same as a regular sale up until the lender gets a court order to control, then their policies kick in which is typically a market listing.  Search the court filings in your target area to find filings, pull those records to identify the properties and owners. Contact and deal with the owner.

Erika Geoffrey · Answer

Ahhh interesting. I was wondering because the low prices seem like it would be an investors dream but I don’t hear of anyone buying them!

ahhaha that’s a real thing so I’ll accept it 🤣

What is the process for buying a foreclosure?

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