Jesse Puente
Real Estate Specialist

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What is a foreclosure?

For many prospective buyers buying a foreclosure seem like a no-brainer.  Prices are much lower so who could pass up the opportunity for a new home?  One consideration if are you're looking for a home as your primary residence or if you're looking to flip or rent the property,  the lower price the lower your mortgage payment, or the higher profit you make as an investor.  

A foreclosure was a heartbreaking experience for the previous owner and a new opportunity for a prospective buyer or investor.  Prospective buyers need to understand that buying a foreclosure requires extra effort, research, and patience I have experience in providing assistance to buyers buying foreclosed properties in both Los Angeles and Orange counties and can help you when ready.  

What is a foreclosure?

A Foreclosure process is by which a bank, a mortgage company, or the lien holder seeks to take the property from the current owner to satisfy a debt.  The lender or the bank takes ownership of the property through a process that has the property sold to pay off the debt.  The owner or debtors lose all rights to the property as well as all their investment.  In addition to losing the property and their investment, their credit report is affected for 10 years.

The process of a foreclosure


The property owner has missed one or several payments, during this stage the owner has been given legal notice that the foreclosure is about to begin. If the owner can cure the back payments the initial state is closed with no further action if the owner can't cure the default and get the loan back into good standing the owner may have options including selling the property before the lienholder is able to finalize the process.  During the pre-foreclosure period, the owner may reach out to the servicer of the loan to request a loan modification or a short sale if the modification is denied while remaining in the property. 

What if the loan modification is denied?
There may be several reasons for a modification to be denied, with all modifications are based on the owner's finances with other considerations that the lienholder must review evaluate, or to denied or approved.  If the modification is denied the foreclosure process may continue and at this point, the property may be approved as a  short sale. 

We know that in years past many of the short sale properties represented a bargain that is not always the case due to a very competitive market.  The home can be placed at auction with the starting bid showing a bargain, the initial price will probably go up with the successful bidders usually have to pay cash at the time of purchase.  In addition to the sales price, a premium may be charged in some cases the premium may be up to 5% of the sales price with many of the properties limiting access prior to the sale. 

Bank-owned property best  known as an (REO)

At this stage, the bank or lienholder has taken ownership and procession of the property.  Before the bank sells the property some issues must be cleared at times title issues must be cleared or other issues that prevent the sale, during this period they must also follow the complexities of state and city regulations on foreclosed properties not to affect the local neighborhood. 
We can provide you guidance regarding foreclosed properties as we have represented buyers in the past but understand a foreclosed property is not for everyone all aspects must be analyzed and in some cases you may need to consult legal counsel to make sure no other legal issues may affect your purchase. 

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