Quote from kowboy:
I believe the Op and congratulations.
Thinking this might be a potential opportunity, I inquired regarding foreclosure sales from a local real estate attorney. He mainly represented lenders in the foreclosure process. However I came away from the attorney's office less than enthusiastic.
He pointed out two major potential problems. The first was, as a bidder on a foreclosure, you usually do not get access to the property prior to bidding in order to determine the condition or deficiencies of the property. So the bidder could potentially be buying a "pig in a poke". I've actually looked at numerous lender owned properties that have had cracked foundations, flooding basements, mold, mildew, pet damage, leaking roofs, structural and interior damage, asbestos duct wrap, asbestos siding, inadequate lot drainage, etc. Quite often the cost of repairs exceeds any profit potential.
The second was, that the original owner in a few instances filed bankruptcy the day of or just prior to the foreclosure sale, potentially tying up the bidder's funds and with no immediate settled title available to the bidder.
I would prefer to purchase only properties in really good condition directly from the lender after they have title and can convey the property by warranty deed with proper title insurance, rather than at foreclosure. Unfortunately in my state, once the lender has acquired the property, they have the option of marking the price up, which can make the profit potential much less, but also less risky for the buyer.
This is only my opinion and is not intended as advice to anyone. My only suggestion would be to consult with an experienced attorney to learn the pros and cons, and to use the services of a qualified professional who can advise on the condition of the property.
True....you will not have access to the property. Which leads to part of the reason that these properties sell cheaply...because the interior condition is unknown. At a trustee sale I'm going to assume everything is wrong on the inside...and make my bid accordingly.
Obviously, you can determine the condition on the exterior, and depending on what that is you would reflect that in your bid.
In the states I'm aware of, you pay cash at a trustee sale. (Every state has it's own unique rules for trustee sales, so keep that in mind). So there is no opportunity upfront to obtain a mortgage. This precludes most people from buying a property at the trustee sale...another reason why properties sell at discounts.
And then too....this can be a tedious, time-consuming, and frustrating process. Today most properties going to sale are properties with loans reflecting a high loan to value. The opening bid will be the lenders bid in the amount of their loan plus back interest, penalties, and costs. This alone rules out most of the properties available at trustee sale, because the deal makes no sense given it's a cash deal without access to view the property.
When there is large equity in the property, it may be sold, refinanced, etc etc right before sale...meaning that your time and effort you spent on due diligence on this property has been wasted, at least for the moment.
So as it goes, there are few properties with sufficient equity that come to sale. And when they do, there is normally a crowd there to bid.
However, once the property goes back to the lender, it eventually is put back on the market, generally through a Realtor. They can price it however they want...and generally rely on the Realtor to help in setting the price. The way you make a deal on these properties is by making enough bids, at a low level, until you finally run across a lender motivated enough to drop his price.
In my experience, this will be the lender who has a property that needs plenty of work, and therefore he can't sell it to the retail crowd, because they either can't look past the work, or don't have the dough or means or desire to do the work. I've made many good deals on properties of this type. I've never been able to buy a good looking property really cheap. That's my experience, and the experience of the people I know.
I would point one other thing out. Attorneys are good at pointing out all the things that can go wrong with something. While it's true that properties at trustee sale cannot be viewed inside, there is not much in a property that can't be fixed if you have the money to fix. So the idea is to bid reflecting a worst case scenario. Usually newbies don't understand this simple reality.
In terms of the property here though, the numbers don't jive. $190K for a $900K is way too big a margin unless there was something wrong at the property, or unless the $900K is wrong. Just my view after several decades of acquiring real estate in a variety of ways, to include trustee sales.
OldTrader
Edit: By the way, I have never once seen a situation in several decades where a bankruptcy filing affected a successful trustee sale buyer. Reason? A bankruptcy stops the sale, and therefore, the sale doesn't take place, the buyer doesn't hand over any money. This is the case in the two states I've bid on properties. Some states have redemption rights...which changes the game somewhat, and perhaps this comes into play somehow in one of those states.
