Monday, November 19, 2012

Rate Records Again and Buying Foreclosures
Well, last week rates dropped to new record lows, both for fifteen and thirty year fixed rate loans. So, what was cheaper is now even more so! Time to get out and start looking if you're a buyer, or get your home ready to go to market if a seller you may be. In the latter case, start getting it ready now so once the holidays are over and the buyers are out hot and heavy, cheap cash in hand, yours will be one of those they can look at and make an offer on!
Now, the second subject of our headline--buying foreclosures. There are two ways to do so--1. buy at the public auction that forecloses the property (which is what we'll look at) and 2.) buying from the bank after it has foreclosed. In both cases you can really get a good deal, but it is the former that has possibly huge benefits--if you approach it properly!
Assuming you've followed the published announcements on the potential foreclosure sales and confirmed that the scheduled foreclosure auction will happen on a specific date and at a specified location, you decide to go and bid and hope you're the winner. You gather enough cash and figure, "How hard can it be?" STOP RIGHT HERE! First of all, long before you decide to go and bid you should be aware of a few very important things. These will take some investigation by you in advance of the auction. You should know which mortgage is foreclosing before you bid. Why, you ask. Well, if the foreclosing lender has the first mortgage, and you win, the house is yours, free and clear. But, what if it's the second or the third mortgage, or worse? What then. Well, you still end up owning the home if you're the winning bidder. BUT, and this is where it get's extremely uncomfortable, you also end up owing all of the other superior mortgages that are already on the property. Congratulations! Just what you needed--additional debt that you had no knowledge of and even less desire to owe!
So, how do you determine what mortgage is foreclosing? Call your local title company and ask them for a property profile. It will likely cost you a couple of hundred dollars, but better that than owing tens of thousands that you had no involvement in incurring. In the profile will be copies of all mortgage and other debts liened against the property. with a little assistance from your title company, you usually will be able to see what mortgage, if more than one exists, is being foreclosed.
Let's assume you're living right and you find that the loan being foreclosed is the first mortgage. Great! Now how do you handle things from here out? Well, unless you know the current owner and are on friendly terms, it's likely that you'll have no opportunity to do any inspections of the property to see if there are termites, dry rot or other physical/structural issues with the property. Might buy a wonderful house--or you could end up with one like the house in Tom Hanks' movie, The Money Pit. You won't know until you own it, so be ready for possible pains in the wallet. It may not happen, but be prepared.
Now, as far as bidding at the auction, you MUST have cash or cashiers checks covering the amount you intend to bid. How much that is depends on how much you're willing to spend for the home in question. It's kind of like going to Vegas. If you're smart, you decide how much in advance is the absolute maximum you'll bet--and you stick to it--or else. Same here. Determine what is the most you're willing to pay for the property and stick to it. You may find that you lose out because the winning bidder paid only $100 over your max, but if you don't limit yourself, you could also get into a bidding contest that takes you far over your preferred maximum.
As for having cash or cashiers checks (Personal checks not accepted here) in a proper amount, you'll likely wonder how is that possible as you have no idea what will be the winning bid. That's simple. You endorse the checks over to the seller or its representative, according to what the auctioneer instructs you to do and if your total is a bit over the actual winning bid, you'll receive a check back in a few weeks for the difference. Same with cash, but who likes to carry around tens or hundreds of thousands of dollars in cash? I recommend going the cashiers check route. It's safer too.
Well, that's pretty much it. If you go and bid, good luck, but remember these few guidelines when you do. Then, if you decide to get a current market value and sell it, or you want to keep it as a rental, call us for assistance. We'll be happy to help. Peter: (415) 279-6466; Jane: (415) 531-4091.

Have a GREAT Thanksgiving!


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