Are you still thinking about buying a foreclosure? Have I not talked you out of it yet? I did a whole video on buying a foreclosure here in California and Santa Cruz, and I was trying to talk people out of it then, but I’ll give you some more insight in this video because I just listed a foreclosure property. And I’m going to go through the stuff that I learned that I think you need to know as someone who may be in contract or going into contract or considering a foreclosure property, mainly here in Santa Cruz.
It is best to have a real estate agent who has some experience dealing with banks or distressed properties, not necessarily a foreclosure, but a property that needs a lot of work. How you can go through that property and understand everything that’s going on with it. Not necessarily that they have all the contractors that are going to fix it and make it nice for you because not every real estate agent does. But I’m pretty sure I can help you understand everything that’s going on with it. I think that’s the kind of agent that you are going to want with a foreclosed or distressed property. One where it just hasn’t had a lot of love and you’re trying to figure out what’s going on with it.
You are not going to get full disclosures. Reports, records, or of that from the bank. Banks typically are out of state, they’ve never seen the property. They’ve foreclosed on it. They are now considered the seller, but they have no idea. We don’t really know about the property, have never been there and have no connection to the property. No real good information about the property is going to come from that supposed seller. Now, when you work with a seller, a true seller, like you know, Joe and Joan Doe 1, 2, 3 Main Street and you write an offer on their property, you are going to get disclosures from them.
Often here in Santa Cruz you are going to get a home inspection, a termite inspection, and disclosures from the selling side. And in those disclosures, you might see something that says, the garbage disposal, it doesn’t work. You may think, well they told me that doesn’t work. And okay, fine. Or you might get a plumber to make sure it is not a big issue. Sometimes disclosures are important because of the questions they bring up not the questions they answer.
Check out the quick video it does not show all the problems!
You have to be okay with not knowing what will happen. Writing an offer on a foreclosure, it takes forever for them to get back to you. You might submit an offer on a Monday and you may not hear back from them for another Monday. What are they going to do? What do they want? As the agent, I would just check in how’s it going? They would tell me, it’s in with legal and they’re checking it out. And then this is the other thing about that whole thing about when are they going to sign it? It’s a paperwork quagmire that you’re going to get into with banks. Paperwork that doesn’t really give you much about the property and they get picky about commas, spaces and how the contract is written but less concerned about the property or the contract.
You need to visit the local government county or city to see what’s going on the property to make sure you understand if there are violations of code or liens. There could be entities out there that have a vested interest in how you use and develop that property and you may find out there is nothing wrong or find out there are big issues. I myself bid on a property that wasn’t in foreclosure, but it had the same element in that the city had determined this property was a problem and they were going to go after the new owner for everything that they wanted cured on the house. We were told that the city wanted some changes, but when we talked to the city, they had a huge list and they seemed angry. We backed out. This foreclosure listing did have a red tag, it did have issues with the county. The buyer’s agent very smartly went down to the county right away and got with them to help the buyer understand what was going on. I really try to get buyers to go down to the county and talk to the county or city about properties when there are questions.
In this case I was in touch with the county. They said that the fees for the red tag that had been on there for a long time, it needed to be paid. And they told the bank (the now seller) At the very end the bank said they intended to pay the red tag fees but they never said anything. Never hinted they would pay for anything.
The last and most important thing to know is banks can be negotiable about problems with a property if presented correctly. A formal bid with a licensed contractor, and a summation of the work that needs to be done may get you a price reduction. It is possible if you see a foreclosure actually on the MLS or with an agent it may be because that particular property has more problems than the typical foreclosure investor wants to invest in. I hope this helpful please contact me for more information!