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Hello.

I have never been involved in trying to purchase a foreclosure, sorry for the newbie questions.

A home near us that we like was listed as pre-foreclosure on the county web site.

I called the county office, and was given all the publically available info. Letters were sent in August 2012 that the property was behind on payments and headed to foreclosure. In Dec 2012, a hearing before the magistrate was scheduled. That has yet to occur. She also told me the name of the bank handling the mortgage.

She didn't have any advice on how to proceed, she said I could watch for a Sheriff's auction. The home is in a beautiful neighborhood and well cared for on exterior at least. Street has homes in the $300k's, Zillow has the foreclosure price listed at $140k on this property. I don't know how Zillow determines a foreclosure price.

Is waiting for an auction really the right move? Do I write the owners a letter stating my interest?

Thanks!!

Member Summary

Correction: Zillow's foreclosure value is $200k, not $140k. The Zestimate is $275k which is about average for this street. When new in 1994 and when resold in 1998, both times it went for approx $300k.

You could approach the owners and try to get them to do a short sale.

Depending on your state, you could attend and bid at the auction. Different states have different rules, usually you need cash for the full purchase amount in a cashiers check at the auction, which rules out most buyers. Even if you do, banks often set the starting bid price well over market value, guaranteeing the property will be returned to them (the bank chooses the starting bid).

Other than that, you let the bank take it back and you wait until they list it for sale (which could be a long time after the auction, depends on the bank).

Some people try to write the bank after the auction (pre-auction they don't own the house, so they can't do anything with it) and let them know they are interested, I've never heard of a case where that actually helped though. Banks are too big and everything needs to process through the normal "workflow". I'm thinking exceptions to the normal workflow such as letters written to express interest in properties are just thrown out. Too much work for the bank to handle those types of one off cases.

I looked into my county's auction rules. A 10% deposit with $10,000 maximum is required at the auction, so I'd need $10k with me that day. Interest on the balance starts accruing after 8 days, and the balance is due within 30 days or you're in contempt of court.

I have the income to backup this size of a purchase. Can I get pre-approved, and then use a regular mortgage for the purchase? I'm guessing sheriff's auction purchases don't quality for a regular mortgage.

If that's true, then I think a letter to the owners attempting to work out a short sale is my best bet. Let's say they bought in 1998 for $300,000 and they put 20% down. Mortgaged $240,000 for 30 years. After 15 years, they've probably paid roughly 1/3 of principal off. So around $160k is still owed. Using these simple numbers as a guideline for the sake of discussion, what amount do you think they'd be looking to get? After 15 years I doubt they'd be willing to walk away with nothing in their pockets, right?

I'm not sure if you could get a normal mortgage on that type of property, but I'm guessing no. In my area, you pay cash at auction and you get a deed in the mail around 2 weeks later (which you then record). You don't get keys to the house nor do they remove any existing tenants or owners. It's your job to hire a locksmith to get in and evict (depending on the law, you can't immediately evict renters) either the owner or renters (and hope they don't do any damage in the meantime). As you can see, there are some pitfalls there.

I would just write the owners a letter and basically say "I've been looking at homes in your area and I'm interested in a home like yours. I'm not an investor and am willing to make a fair market priced offer. Even if you are upside down on your home, I would be interested in trying to purchase your home as a short sale.". Work the wording, but I wouldn't include an offer price in the letter. Also, I'm not sure if you can check with your county recorder to see the history of loans on the property. My guess is they refi'd sometime in the past, took money out, and are probably upside down on the property. Most people don't go to foreclosure with equity in a property.

This is definitely a thread where OP should mention in which state he is looking.

There is a 'Magistrate hearing'?

Ohio

Maybe the owners did a cash out refi some time ago (during the boom years). Now they own more than the house is worth.

bxd20 said:   I looked into my county's auction rules. A 10% deposit with $10,000 maximum is required at the auction, so I'd need $10k with me that day. Interest on the balance starts accruing after 8 days, and the balance is due within 30 days or you're in contempt of court.

I have the income to backup this size of a purchase. Can I get pre-approved, and then use a regular mortgage for the purchase? I'm guessing sheriff's auction purchases don't quality for a regular mortgage.

If that's true, then I think a letter to the owners attempting to work out a short sale is my best bet. Let's say they bought in 1998 for $300,000 and they put 20% down. Mortgaged $240,000 for 30 years. After 15 years, they've probably paid roughly 1/3 of principal off. So around $160k is still owed. Using these simple numbers as a guideline for the sake of discussion, what amount do you think they'd be looking to get? After 15 years I doubt they'd be willing to walk away with nothing in their pockets, right?

They also may not have put 20% down; maybe as little as 0 with a second mortgage. Zillow may be reporting the balance of the first mortgage, which is possibly what you could have it for at auction (second lien is extinguished). But if there's a second mortgage and they're underwater (most likely the case, else they'd sell) then you probably have no shot at a short sale (hard enough to get one party to agree, much less both, especially when the second is likely to be wiped out and the first is unlikely to lose anything as is).

If you're trying to pursue a foreclosure, the first step would be to not pay your mortgage.

Right now your best option is to try to get the sellers to cooperate with a short sale . You need to verify local rules and law and see how much cash you can put in their hand to entice them to do it. Since the lender is supposed to get all the proceeds from a short sale, Often this needs to be worded in the form of purchasing their furnishings for an inflated price or providing "relocation assistance " payments .

If you don't have all the money in cash forget about bidding at the actual sale, at that point your best bet is simply to waif till a realtor lists it on the market for sale as a REO and you can get financing , inspection. Etc

Be careful on the auction homes. I am not sure it has to go through the escrow process. If it is not and has any liens on it, you might to have to pay big. I get all of my foreclosures from an agent and go through escrow process. I just had one two months ago and it had $10K lien, escrow company got it taken care. Good luck.



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