HOW TO BUY FORECLOSED HOUSES IN CALIFORNIA

HOW TO BUY FORECLOSED HOUSES IN CALIFORNIA
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Foreclosures are a process that requires more homework, documentation, and effort than buying any other kind of property. They are basically not the best place for first-time purchasers to engage. They are new markets for real estate that have the potential to be very profitable but are also very unstable and hard to understand. However, foreclosure listings in California will have the lowest pricing in the area, making them a good option for those in the market to buy cheap houses or invest in a new property. While foreclosed houses offer a fantastic investment opportunity due to their below-market values, it is not easy to buy one in California. You may squander resources (both time and money) with no positive results. However, the majority of these problems can be reduced or avoided with smart preparation.

What is a Foreclosure?

A foreclosure is a procedure that lenders can start when a borrower defaults on their mortgage payments. The lender will take possession of the property and sell it in the hopes of making a profit and paying off the debt.

Different states have different foreclosure timelines; in Alabama, it just takes 30 days to foreclose on a house, while in New York it can take well over a year. Foreclosures in California on the other hand can stretch on for well over 200 days, making the process anything but quick and straightforward.

However, to avoid having to involve the courts, the vast majority of California foreclosures are non-judicial. Homeowners whose houses have been foreclosed upon are afforded a number of safeguards by the state, including the opportunity to make payments and reclaim possession of the property up until five days before it is auctioned. For purchasers looking at this kind of home, this can make things more difficult.

How Do Foreclosures Work in California?

Foreclosures in California might take as long as 200 days or more. A missing payment counts as day 1, while your debt enters default on day 90. You’ll get a notice of trustee sale after 180 days. Following that, your bank will likely schedule the auction for about 20 days after.

The Stages of Foreclosure 

Depending on where the property is in the foreclosure process, different steps must be taken to purchase it. Different strategies are required at each stage. They are;

#1. Pre-Foreclosure

Pre-foreclosure occurs when a homeowner has been served with notice that foreclosure proceedings will begin in the event that they do not bring their mortgage payments current. The only way to prevent foreclosure if they cannot come up with the money themselves is to sell the house before the lender takes possession of it.

Here is where you step in. Homebuyers can speak with the pre-foreclosure homeowner and negotiate a bargain with them. As their credit score will be preserved, this might be of great assistance to homeowners whose homes are under foreclosure. Additionally, you’ll get to take a look around the property before deciding to buy it in foreclosure.

#2. Foreclosure Auction

The house will be put up for auction if a homeowner is unable to make their mortgage payments and cannot sell it during the pre-foreclosure process. At foreclosure auctions, purchasers can discover great prices on homes. However,  they can’t inspect the property beforehand or check for title problems. This process basically makes purchasing a home at a foreclosure auction a significant risk. This is because you could easily find a home that will require significantly more repairs and upgrades than you anticipated.

#3. Bank-owned or Real Estate Owned Properties

If a house survives the first two phases without selling, the lender will try to seize it and put it up for sale just like any other house. They will make the necessary repairs, clear the title, and follow all applicable state laws. Similar deals to those obtained in the other two stages can be discovered by purchasing a property during this phase of the process.

How Do You Find Foreclosed Homes in California?

There are numerous web resources that list foreclosures, including RealtyTrac.com, Foreclosure.com, and Foreclosures.com. You can also narrow down your search by location, price, or even the number of bedrooms. The county recorders’ or clerks’ offices may also have lists for foreclosures.

Are Foreclosures Allowed in California?

Both judicial and nonjudicial foreclosure processes are available to lenders in California for foreclosing on mortgages and deeds of trust (through the courts). However, in California, the nonjudicial foreclosure process predominates.

How Do You Find Homes in Foreclosure?

The following are some of the top best free sites with foreclosure listings;

  • Realtor.com Foreclosures
  • Foreclosure.com
  • HomePath.com
  • Equator.com
  • HomeSteps.com
  • Bank of America-owned properties and foreclosures
  • RealtyTrac
  • Zillow Foreclosure Center

How to Buy Foreclosed Houses in California

There are seven mandatory actions to take when purchasing a foreclosed house at any of the three stages, with the eighth being entirely discretionary.

#1. Get Pre-approved for a Mortgage

For a mortgage lender to determine if you are pre-approved or pre-qualified, you must first provide them with details about your financial situation. If you get pre-approved, the lender will send you a letter stating the maximum loan amount you could receive. Also, if you’re competing with other purchasers, showing that you’ve been pre-approved for the full purchase price could be a huge advantage.

However, take into account that the majority of foreclosure auctions necessitate payment in cash. So, if you are interested in purchasing a foreclosed house but lack the funds to do so outright, you may want to investigate alternative methods of financing. These could include; taking out a HELOC, borrowing from family and friends, or tapping into your retirement savings.

#2. Work with a Real Estate Professional (Optional)

The assistance of a real estate agent will basically be invaluable if this is your first time purchasing a foreclosure. A real estate agent for example will,

  • Represent you in negotiations
  • Give you the rundown on any rules you need to follow in your area.
  • Assist with writing a letter of offer
  • Make you aware of potential dangers
  • Find out the answers to your inquiries and address your worries about the procedure.

Hence, you use this opportunity to educate yourself about the foreclosure market and make an informed decision the next time you want to buy a home in this situation.

#3. Look for Foreclosed Houses

Generally, it requires much time and effort to find a foreclosure listing that is a good financial bet. So, you need to have a good idea of where to look. The great news is, there are a number of options to consider which will make this easy;

  • Your Real Estate Brooker

If you opt to use their services, they will help look for foreclosure listings that fit your requirements and report back to you.

  • Search Engines

A variety of websites showcasing such properties should come up when you search for “foreclosure listings near me” on your preferred search engine. This helps you search for a house that suits your needs and pocket.

  • Real estate websites.

Pre-foreclosures, auction properties, and real estate-owned (REO) listings are common features of real estate websites. Hence, to maximize your returns as an investment, Property Marketplace is the greatest platform available.

Real estate websites have generally proved useful for investors looking for off-market, foreclosed, and tenant-occupied properties. They can be used for CMAs and the purchase of future rental properties. On each listing page, you’ll find a cutting-edge investment property calculator, which may also help you evaluate potential returns and income.

#4. Put up a Bid or Offer

You’ll need a lot of patience though because it could take multiple offers before a seller finally agrees to your terms. The same holds true for auctions open to the general public. To acquire the property you desire, you may need to outbid numerous other potential purchasers. So, to avoid overspending because you became too aggressive in a home auction, it’s a good idea to decide on a maximum purchase price before you even place a bid.

Important bidding advice: Prior to placing a bid, it is basically important to find out how long the property has been sitting empty. Leave more room in your renovation budget if the house has been empty longer than average, and be ready to submit a modest bid. However, if it was just released to the public, you should be ready to offer the most money you are willing to.

#5. Secure Your Property

You should assume that you are purchasing the property in its current condition when you decide to buy foreclosed houses in California. You have no leverage to convince the seller to fix anything before you buy their home. It’s also possible that you won’t be able to examine the property before the auction.

So, after an offer or bid is approved, the buyer should conduct a title search, obtain title insurance, and schedule a home inspection. Complete these steps before any monetary transactions are made. Major damage to the building, the foundation, or the land is common among foreclosed properties. In addition, you’d prefer a clean title with no encumbrances or liens. Regardless, your legal claim to the property will be safeguarded by title insurance.

#6. Get the Home Appraised

To determine a home’s true market value, a licensed specialist must conduct an appraisal. They factor in the property’s condition and recent sales in the area and market to arrive at a number.

Most banks and other financial institutions will generally require this before they will provide money for a mortgage. If you purchased cash or used a non-conventional loan, however, an appraisal will reveal whether or not you may refinance the property to eliminate your debt or finance the improvements.

#7. Finalize the Sale

At the closing, you will pay the full purchase price for the property, sign the deed, and take possession of the property. You may need to complete this step before moving on to #5 and #6 if you win a bid at auction and are required to make payment either immediately or the following business day. Meanwhile, you will only have a few days to get the resident of your property out of the dwelling.

Additionally, wait until you obtain the certificate of sale, your property title, and title insurance before making any improvements to the property. A competitor may match or outbid your offer within 45 days as a result of SB 1079.

What are the Disadvantages of Buying a Foreclosed Home?

While California foreclosed houses offer a fantastic investment opportunity due to their below-market values, which is a good reason to buy one, here are some of the disadvantages;

  • If you buy at auction, you won’t be allowed to see the inside of the house beforehand.
  • The time involved exceeds that of a standard purchase.
  • There may be expensive repairs you need to do.
  • You may be put in a position where you have to evict the prior residents
  • This house is being sold to you in its current condition.

How Do I Find Bank Owned Properties in My Area?

  • The Multiple Listing Service (MLS), which is basically the database most real estate agents employ to access and submit listings of houses for sale, also includes bank-owned properties.
  • Another option to look at is the websites of various banks. On their websites, several banks allow you to look for real estate-owned properties.
  • There are also websites with specialized real estate listings that you can access through search engines

How Long Does it Take to Buy a Foreclosure in California?

A lender’s ability to foreclose on a home is severely limited by the length of time and the expense of the process in the state where the lender chooses to file. This can take more than 200 days in some states, like California.

How Long Does Foreclosure Take in California?

Depending on the laws of the state in which the lender files the paperwork, the process of foreclosing on a property can be very time-consuming and expensive. This can take more than two hundred days in some states, like California.

Conclusion

Real estate in California, especially in major cities, is notoriously costly. However, purchasers in search of a bargain may find California foreclosures to be an attractive option.

Nonetheless, you need to understand what it is you’re getting yourself into and have realistic expectations before investing in the foreclosure market. California has lately made it more difficult for investors to buy foreclosed houses, but that doesn’t mean you can’t still find great bargains.

If you’re new to this and want to make sure you have a good and profitable experience, it’s best to work with a team of pros.

How to Buy Foreclosed Houses in California FAQs

Is there an increase in California foreclosures?

Generally, foreclosure filings in California skyrocketed by 115.7% from the first half of 2021 to the first half of 2022, from 7,575 to 16,340. One in every 881 residences in the state is in foreclosure, making it the fourteenth-highest rate in the United States.

How is Biden addressing foreclosures?

The Biden-Harris Administration extended the moratorium on foreclosures and the window for homeowners with government-backed mortgages to enroll in mortgage forbearance shortly after entering office to help out struggling homeowners.

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