Do you know of any tips or downfalls when buying a foreclosed property?
Any issues I should be aware of? (like back taxes, liens, second mortgages etc)
Did anyone buy foreclosed property and what was your personal experience? Would you do it again?What would you do differently the second time around?
Thank you in advance
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That depends
Are your trying to buy a foreclosed property at the Trustee's sale or after the Bank has taken the property back?
After the bank has taken the property back it is just like any other transaction.
However you pay fair market value, just like you would on any other transaction.
If you buy the property from the bank you do not get any better deal than you could get on any other property on the market.
If you buy at the Trustee's sale you can get a discount from fair market value, however you face some very great risks if you buy at the Trustee's sale.
If you buy at the Trustee's sale you do not get Title Insurance, you must pay all cash with a cashier's check on the spot if your bid is accepted, you do not get any financing at the Trustee's Sale.
Also at the Trustee's sale you must check to see if you are buying the interest of a first, second, third Trust Deed or higher.
If for example you buy a second trust deed you als have to pay off the holder of the first trust deed.
You have to do your research to determine which order the note is in to know if it is first, second third or higher.
Nobody tells you at the Trust Deed sale which position the note is in.
Also some liens, such as tax liens are not extinguished by the sale at a Trustee's sale.
Again, you have to do your research to determine whether or not there are tax liens against the property that are not extinguished by the Trustee's Sale.
(Edit) Thank you for your clarification.
The answer is there are very significant risks buying at the Trustee's Sale. the Trustee has no obligation to tell you about any liens or any other factors which might be detrimental to you.
Buying a property at a Trustee's Sale is truly "Buyer Beware"
You really have to know how to do your research.
You need to learn how to research the history of the property at The County Recorder's Office.
Not all liens are extinguished by a Trustee's Sale.
Also the Trustee will not tell you which position the loan is that you are buying.
For example if you buy a second loan you still have to pay off the first.
For example at a recent Trustee's Sale that I attended in San Jose California, there was a property for sale.
I estimate the fair market value of the property to be approximately $350,000 in the current market.
The amoun of the loans against the property are a $350,000 first and a $80,000 second.
The holder of the second loan foreclosed.
However at the Trustee's Sale the Trustee dos not disclose whether the loan is in first or second position or higher.
The Trustee opened the bidding. Immediately an inexperienced perso bid $20,000.
There were no more bids. this inexperienced person was thoroughly delighted with himself. He thought that he had purchased a $350,000 property for $20,000.
What he did not realize is that he was responsible for paying off the $350,000 First.
So he had really purchased a $350,000 property for $370,000.
I did follow up with this person to find out what happened.
He is of course furious and feels that he was cheated because he does not think that he owes the holder of the first note anything and of course the holde of the first has now foreclosed on the property and will sell it again at a Trustee's sale if the new owner does not give the holder of the first moretgage $350,000.
However that illustrates why you really need to know what you are doing if you are going to purcahse properties at Trustee's Sales.
The buyer of the $350,000 property had recently attended one of those get rich quick seminars that they advertise in the newspaper.
He had paid approximately $1,000 for a set of worthless books and tapes that did not teach him how to buy properties at Trustee's sales without losing his shirt.
Esentially the only people making any money are the promoters of these worthless boks and tapes on buying foreclosed properties at Trustee's Sales.
It costs $50 to $100 at most to reproduce this material and most of it is worthless.
It merely appears impressive to people who have little or no experience with real estate transactions.