BUYING A BANK OWNED OR FORECLOSURE PROPERTY (REO)
Sandbird Real Estate
FORECLOSURE TERMS
SHORT SALE– THE HOMEOWNER OWES MORE ON THE HOME LOAN THAN THE HOME CAN BE SOLD FOR AND THE BANK AND OWNER ARE COOPERATING IN TRYING TO SELL IT FOR LESS THAT WHAT IS OWED.
NOD– NOTICE OF DEFAULT (First Notice Homeowner Recieves letting them know they are going into foreclosure)
NED- NOTICE OF ELECTION & DEMAND (Legal looking document stating a home will be going to the Public Trustees Sale)
BANK-OWNED/REO/LENDER-OWNED – HOME WHICH WAS PURCHASED AT THE TRUSTEE’S SALE BY THE BANK THAT WAS HOLDING THE MORTGAGE
HUD – A HOME THAT HAD AN FHA, VA OR GOVERNMENT GUARANTEED
LOAN.
PUBLIC TRUSTEE SALE/AUCTION – A HOME THAT IS IN FORECLOSURE, IF LOAN PAYMENTS ARE NOT CAUGHT UP, THE HOME WILL BE SOLD THROUGH THE COUNTY AT THIS SALE.
BUYING A BANK-OWNED/REO HOME IS THE EASIEST AND MOST COMMONLY USED WAY OF PURCHASING A HOME THAT HAS BEEN THROUGH A FORECLOSURE. ONCE THE BANK OR LENDER OWNS THE PROPERTY, IT IS LISTED WITH A REALTOR. THE REALTOR PLACES INFORMATION ON THE MULTIPLE LISTING SERVICE (MLS) WHICH IS ACCESSED BY ONLY REALTORS. HOWEVER, AN INDIVIDUAL MAY GET MOST OF THIS INFORMATION FROM WWW.RECOLORADO.COM. THIS WEBSITE HAS ALMOST ALL OF THE LISTINGS FROM THE MLS, HOWEVER, IT IS DIFFICULT AND TIME CONSUMING FOR AN INDIVIDUAL TO SEARCH FOR ONLY REO, SHORT SALE OR HUD PROPERTY LISTINGS WITHOUT READING THROUGH THE REMARKS ON EACH LISTING. YOUR REALTOR CAN CONDUCT A SEARCH FOR THESE HOMES USING YOUR PREFERENCES AS TO WHAT YOU ARE LOOKING FOR, AND CAN E-MAIL YOU DETAILED INFORMATION AND PHOTOS. IF YOU FIND A HOME YOU WOULD LIKE TO TAKE A LOOK AT, YOU MAY SET UP AN APPOINTMENT WITH A REALTOR TO SEE THE INTERIOR. (Sandbird Real Estate can show you almost any property listed in Colorado including HUD properties which are FHA and VA foreclosed homes.)
AFTER YOU HAVE FOUND THE HOME YOU WOULD LIKE TO PURCHASE, YOUR REALTOR WILL DRAW UP A CONTRACT WITH AN OFFER. EACH BANK HAS ITS OWN ADDENDUMS THAT WILL BE ATTACHED TO THE CONTRACT, AND THEY WILL MAKE SURE ALL OF THIS PAPERWORK IS COMPLETED CORRECTLY. YOUR EARNEST MONEY, LENDER LETTER AND CONTRACT WILL BE FAXED OR E-MAILED TO THE LISTING AGENT. THEY WILL HAVE THE REO BANK SIGN THE PAPERWORK IF THEY ACCEPT THE OFFER, AND IT WILL THEN BE SUBMITTED TO THE TITLE COMPANY AND YOUR LENDER TO PREPARE FOR THE CLOSING. BANKS OR REO'S ARE GENERALLY SLOWER THAN MOST SELLERS SO PATIENCE IS HELPFUL.
BUYING A SHORT SALE - SHORT SALES ARE USUALLY MORE DIFFICULT BECAUSE THE LISTING AGENT AS A RULE, DOES NOT HAVE ANY IDEA WHAT THE BANK WILL ACCEPT FOR THE PROPERTY AND SOMETIMES THE BANK/LENDER WILL TAKE MONTHS TO FIGURE THIS OUT. IN THE MEANTIME THE POTENTIAL HOMEOWNER DOES NOT KNOW WHEN THEY CAN TAKE POSSESSION OF THE PROPERTY, OR EVEN IF THE BANK WILL ACCEPT THEIR OFFER AT ALL. ONCE A SHORT SALE OFFER HAS BEEN ACCEPTED, THE TRANSACTION THEN BECOMES SIMILAR TO A BANK-OWNED. MOST BANKS WILL NOT PAY CLOSING COSTS ON A SHORT SALE PROPERTY ALTHOUGH THEY ALMOST ALWAYS WILL DO SO ON AN REO.
THE FORECLOSURE PROCESS
THIS BEGINS WITH THE FILING BY THE BANK/LENDER OF A NOTICE OF DEFAULT WITH THE PUBLIC TRUSTEE OF THE COUNTY IN WHICH THE REAL ESTATE IS LOCATED. NOTICES ARE MAILED TO THE PROPERTY OWNER, AS WELL AS OTHERS WITH RECORDED INTERESTS IN THE PROPERTY EXPLAINING THE HOMEOWNER IS IN DEFAULT ON THEIR PAYMENTS AND THE BANK WILL FORECLOSE ON THE HOME IF THE PAYMENTS ARE NOT CAUGHT UP.
THE NEW FORECLOSURE LAW AS OF 1/1/08 ALLOWS THE HOMEOWNERS OF NONAGRICULTURAL PROPERTIES FROM 110 TO 125 DAYS BEFORE THE TRUSTEES SALE TO REMEDY THE DEFAULT. THE HOMEOWNER AT THIS POINT IN TIME MUST PAY ALL OF THE LOAN PAYMENTS THAT ARE IN ARREARS AS WELL AS ANY ATTORNEY FEES OR OTHER FEES THAT HAVE INCURRED. WITH THE NEW FORECLOSURE LAW, THE HOMEOWNER HAS A LONGER PERIOD OF TIME IN WHICH THEY MAY CATCH UP-TO-DATE ON THEIR BACK PAYMENTS AND THE PERSON OR BANK/LENDER PURCHASING THE PROPERTY AT AUCTION WILL NOT HAVE A WAITING PERIOD BEFORE TAKING OWNERSHIP OF THE PROPERTY.
FORECLOSURE AUCTION OR TRUSTEE’S SALE – USUALLY TAKES PLACE AT COUNTY COURTHOUSE AND HAPPENS IF THE OWNER IS UNABLE TO FIND THE FUNDS TO BRING THE MORTGAGE PAYMENTS UP- TO-DATE. A PURCHASER AT AN AUCTION NEEDS CASH, CASHIERS CHECK, GOOD FUNDS THE SAME DAY AS THE AUCTION FOR THE FULL AMOUNT OF THE WINNING BID ON THE DAY OF THE SALE. EACH COUNTY HAS SLIGHTLY DIFFERENT RULES ON HOW THIS OCCURS BUT THEY ALL REQUIRE GOOD FUNDS ANYWHERE FROM 90 MINUTES UNTIL THE END OF THE DAY OF THE AUCTION. PLEASE CHECK THE TRUSTEES OFFICE WEBSITES OF EACH COUNTY TO GET MORE DETAILED INFORMATION.
GOOD FUNDS WOULD INCLUDE A CASH OFFER IN THE FORM OF A CASHIER’S CHECK, BUT SOME PEOPLE GO TO AUCTION WITH A LINE OF CREDIT LARGE ENOUGH TO COVER THE COST OF THE HOME OR THEY MAY HAVE GOTTEN FUNDING FROM A HARD MONEY LENDER WHO WILL CHARGE HIGHER INTEREST RATES AND POINTS THAN THE TRADITIONAL LENDER. THE BUYER OF THE PROPERTY MAY THEN BE ABLE TO REFINANCE SOON THEREAFTER TO LOWER THE INTEREST RATE AND TO GET BETTER TERMS IF NEED BE. IF A PERSON HAS AN EXCELLENT RELATIONSHIP WITH A BANK, SOMETIME FUNDS MAY BE ACQUIRED THROUGH THEIR PERSONAL BANKER.
TWO DISADVANTAGES OF BUYING AT A TRUSTEE’S SALE IS THAT IS DIFFICULT FOR A POTENTIAL BUYER TO GET INTO THE HOME AND IS USUALLY PURCHASED SIGHT UNSEEN, AND CASH FUNDS HAVE TO BE AVAILABLE THE DAY OF THE SALE. IN MOST WAYS, BANK OWNED/LENDER OWNED/REO PROPERTIES ARE MORE DESIRABLE TO PURCHASE BECAUSE THE POTENTIAL HOMEOWNER CAN ALWAYS VIEW THE PROPERTY BEFORE PURCHASING, AND BECAUSE A HOME CAN BE PURCHASED THROUGH THE NORMAL LOAN PROCESS INSTEAD OF NEEDING CASH ON THE DAY OF THE SALE.
