The first question I ask when the phone call starts, “I want to buy a foreclosure!” is “Do you have the cash?” In Arizona, when the sheriff drops the gavel at the foreclosure sale, the buyer needs to have the cash—not just a home loan approval letter and 20% down. That’s why most foreclosures become “REOs” or bank-owned properties. The sale on the court-house steps is just the legal formality needed to clear the mortgage lien and put clear title into the hands of the lender, or the home equity lender who then pays off the first lender after out-bidding the first at the foreclosure sale. If the home equity lender buys, its because it reckons that it can resell for more than the first mortgage value and its costs of sale. There are other bank-owned properties as well, and these others are the better ones. When the prior owner offers to give the lender a “deed in lieu” of foreclosure, and the lender accepts the offer, the home is likely to be in better condition than it would be if the prior owner just abandoned the place and walked away knowing it was to be foreclosed upon. In fact, in many situations, the lender will give the former owner some “walk-away” money, or at least forgive more of the equity-shortfall if the home is left in good, saleable condition. Those homes do not pass through the foreclosure process, but are “bank-owned” just as most foreclosed properties become. Both types of bank-owned properties are sold by the banks through the Northern Arizona MLS system. So far, there have not been enough foreclosures or other bank-owned properties in Flagstaff to generate the auctions that we sometimes hear of in Phoenix or other locations. (Those auctions usually happen when a large group of homes in one area becomes available – for example, because of builder default.) Unlike short-sales, these bank-owned properties (also known as REO or “real-estate owned” properties) are already owned by the banks and the closing process is likely to be quick and easy because there is no seller-side loan contingency. (See my post on short-sales yesterday.) There still may be some atypical contract and inspection issues on the buyers’ side because the bank has never seen the property (except, perhaps in pictures) and has no knowledge of its history. But the decisions about how to deal with those issues are all within the control of the buyer, who should be well-informed on the risks by working with a Realtor® engaged by the buyer to work for the buyer and represent the buyer’s interest. (The payment for the Realtor® services comes from the bank-seller’s sales transaction expenses, just as in an ordinary sales transaction.) There may also be some delays because of the overload of the bank bureaucracies, as I discussed yesterday. So, where are these bank-owned properties available for sale in Flagstaff? These REO homes are listed with Realtors® on the local MLS, just as most individually-owned homes for sale are listed. That’s because banks, being professionals themselves, know that the quickest and easiest way to sell a home for the highest price the market will bear, is to hire a professional engaged in the real estate sales business, namely Realtors.® You'll find such homes scattered among neighborhoods all over town, and in most price ranges. So, if you, as a buyer, want to consider REO or bank-owned properties among the many homes available for your consideration in this market, your real estate agent should know right where to find them. You, as a smart buyer, should start by engaging a Realtor®—better yet, one who is an Accredited Buyer Representative—to represent you and help you search for and narrow the field on homes that match your needs. If you want still want to limit your search to homes that are about to be sold on the courthouse steps, and not hire a Realtor® to represent you (I can't think why you would want that!), check out the legal publications for the notices of upcoming sales, or ask one of the local title companies to provide you with a list, or, go straight to the source – the County Sheriff’s or Recorder’s offices. Be aware that the homes on the county’s list may be pulled from the sale at the last minute, either because the owner has reached an agreement with the foreclosing lender or because the seller has declared bankruptcy and the federal court has enjoined the sale pending a full hearing in the bankruptcy court. Also, remember to bring cash, and not a loan commitment, to the sale. By looking only at upcoming foreclosures, you're passing on the bank-owned properties and short-sales, but that's up to you. When you want to buy any Flagstaff, home, including foreclosures, bank-owned properties, and short-sales, start with Team Heitland at RE/MAX Peak Properties—put us to work for you! If you don't start with us, and you get frustrated on your own, we'll welcome you anyway! |
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