Forget haggling for a prized real estate property in Burbank or Studio City. Go for a foreclosed home at half the prize, or near about. No, really. Foreclosed homes are hidden treasures that are dying to be discovered. A foreclosed home is one whose owner is unable to pay the mortgage on the home. Due to this, the house is put forth for auction by the party that repossesses it. The repossessing party is the lender and the role is usually taken up by a bank. Basically, because the owner is unable to pay off the debt, the home (or property) goes into a foreclosure auction so that the loan can be repaid. So how does that benefit you? Read on.
Purchasing foreclosed homes has its own pros and cons and a certain method needs to be followed for the buying process. This process is a little bit different in LA.
How it works in Los Angeles
People looking to purchase property can get decent houses at significantly discounted prices. This is one of the main reasons home buyers try to purchase foreclosures in LA. For instance, if a house is worth one million dollars in Texas, a foreclosed home that is twice the size can be purchased in LA at the same price. This particular practice is not restricted to just LA but is more common here.
One of the most important mandates for buying a foreclosed home in LA is cash purchase. This is also not restricted to LA but the likelihood of cash payment is higher over here. As some houses are sold at an auction, you should be able to bid a certain amount and pay in cash up front.
Furthermore, most foreclosed properties in LA are sold as is and you may not be allowed to inspect them thoroughly. This implies that you will have to deal with extensive repairs yourself if the property is too damaged. But fear not, often the bargain is better than the cost of repairs.
How to Find Foreclose Homes
The process for finding a foreclosed home in any location is the same. The most common method is through online listings and searching for the exact area you want a foreclosed house in. With the help of a reliable real estate agent, you can find foreclosed homes up for auction in LA in no time. You can get information like how many rooms the house has, status of the loan, how much to bid etc. This includes information such as the estimated value and the auction date for the house. If you’re prefer to do your research beforehand then realtytrac.com and foreclosure.com can be quite useful.
Other than this, you can hire a real estate agent who has access to the Multiple Listing Service (MLS) to help you out. Normally, people do not have access to this service, therefore, hiring a real estate agent could be a smart option.
You could drive around in troubled neighborhoods and find different signs related to foreclosed homes being up for sale. This is sort of a long shot method but does occasionally end up working.
How to Buy
As previously mentioned, the most common way to purchase a foreclosed home is to go for the auction and bid. However, for those who do not wish to go for an auction, there are smarter ways to go about the purchasing process.
As a buyer, you can buy the property before the auction as a ‘short sale’. This means you can purchase the property for an amount that is lesser than the total amount owed by the homeowner to the lender. This can only be done after negotiations with the homeowner. A short sale cannot occur without the permission of the lender. Typically, the homeowner will have to convince the lender why a short sale makes sense in their situation.
Another option for buyers is to purchase the property after the auction as an REO i.e. Real Estate Owned. Basically, the starting bid at an auction is more than the amount owed to pay off the debt. If there are no buyers, the beneficiary repossesses the property and it then appears for sale as an REO on their list. Buyers can then attempt to purchase the property.
Research can do Wonders
Foreclosed homes have a lot of technicality to them and buyers usually do not have much experience when purchasing such homes. We would highly recommend that anyone going to purchase a foreclosed home, regardless of location, should do their research. It can save you a lot of trouble and a lot of money.