Portland Foreclosures and Short Sales
A foreclosure is the process by which a lender repossesses a piece of property due to the borrower’s failure to comply with the terms of their agreement. Usually it is because of defaults in payment on the mortgage. A property that goes into foreclosure will go to auction, and if it fails to sell it will become an REO property, which stands for Real Estate Owned (by the bank). A short sale is when the lender accepts a price for the property that falls short of the balance on the owner’s existing mortgage, usually to avoid a costly foreclosure situation. In other words, the property is sold for less than what is still owed to the bank by the current owner. Both of these situations represent an opportunity for a savvy investor to make some profits, but the processes are complex. The advice and council of a Professional Real Estate Agent is highly recommended.
Pre-Foreclosure Process
Once a homeowner misses a payment, they become delinquent on their loan. They will receive a Notice of Default (NOD), which is a public-record warning to the borrower that they are behind on their payments. A home that is in the pre-foreclosure process is a good possible candidate for a short sale. You want to choose properties that have a sizeable difference between the value of the property and the balance of the mortgage. This difference represents your possible profits should you successfully make the purchase. Make sure you factor all of the expenses you will face into the value of the home. If the property is ideal, you will want to contact the homeowner directly and begin the negotiation process. Remember the homeowner is likely going through a difficult period in their life, reflected by their financial difficulties. This is an exchange that many people wisely leave to their real estate agent. The lender will also have to be informed of and get involved with the proceedings. Before you agree to anything, you need to know that the title is clean, so have your agent check on that for you.
Foreclosure Auction Process
Be wary of the auction process. It is easy to get caught up in the action and make a bad decision. An auction can help you find Portland homes for sale at rock bottom prices, but it is essential that you do your research. You should go to an auction or 2 just to sit and watch the proceedings before you jump in and get involved. You want to be at ease during the auction, free from the temptation to get into a bidding war.
Arrange your finances right away. You will need to present proof of your purchasing power before you can make a bid, so bring your cashier’s check. You will have to put down up to 10% as a deposit right away if you win, and you will be expected to pay the rest within a set (and very limited) time period. Set your price limits and stick to them to ensure that you walk away with a good deal. The opening bid for the property could very well be below market value. It is determined by adding the balance left on the loan to the interest and back taxes, and any various legal fees and court costs. Do your research on the property beforehand, so you go in knowing what the property is worth and whether the title is clear. Make sure the necessary repairs are in your budget as the house will probably be sold “as-is”. You can walk away with a great deal, but remember that many of these properties open at a higher price than they’re worth. Know what you’re after.
REO Properties
Properties that didn’t sell at auction end up as REO properties, owned by the bank. Since the titles have been cleared, there will often be competition in the market for these homes, and you aren’t assured to be getting a bargain. You should know the value of the home before you make an offer. Remember that the bank is not in the business of losing money. Although it is in their interest to get rid of these properties, they are trying to get the best price possible and are prepared to negotiate.
Please don’t hesitate to contact Dawn Belisle-Marston if you have any questions or need any assistance. To get the best deal, you need access to the best advice and information.
