As distress properties continue to dominate the Southern Californian real estate market, it’s easy for home buyers to find great bargains in the San Diego area. Basically, there are three ways for home buyers to acquire foreclosures, and these include buying presale, auction, or bank-owned properties.

Auction Properties

Most home buyers who choose to buy a foreclosure do so from a foreclosure auction, because they are able to get title to the property quickly. Also, property price at a foreclosure auction is generally lower than those that are offered in other types of sales.

One thing that may discourage you from buying a home at a foreclosure auction is that you cannot view the interior of the property. Still, you may be able to tell the condition by looking at the property from the outside. On top of that, San Diego County Short Sales will research the home to find out as much as possible.

Short Sale Properties

When buying Short sale  properties, you deal with the homeowner directly. The main advantage of buying a short sale  home is the discount, which can be as high as 30% off the market value of the property. However, there is also considerable risk involved, because title problems are common with purchases of  short sale homes. Also, buyers are required to pay for inspection costs. a

Bank Owned Properties

Properties not sold in foreclosure auction usually end up bank-owned.  Many home buyers prefer to buy from banks because they can get a traditional mortgage for bank-owned properties.

The agents at San Diego County Short Sales are seasoned in buying bank-owned properties. We understand that banks often sell foreclosed homes at market value when they would have rather sold the homes for much less at a foreclosure auction. When you come at it from this angle, it’s easier to get the best price possible on a bank-owned property.

So a seller has accepted your offer on a short sales property in San Diego. Now what?

The truth is that the short sales closing process is not all that different from a typical real estate closing, except for a few minor considerations. Below is a quick list of events you should expect after your short sales offer has been accepted.

1. The lender will want a revised closing statement to reflect numbers that may have changed since you made your original offer.
2. Now is the time to schedule the necessary inspections. In California, most inspections check for mold, settling, and cracks within the structure along with various other visual checks to ensure the home is in good repair.
3. While you should complete a preliminary title report to determine what kind of liens are on the home, a final report will be done before the closing. Your real estate team can help you navigate the reports and handle any existing liens.
4. Assuming all things go well with inspections and the title report, you then proceed to the closing where you sign all the typical documents a buyer signs during a closing. The only additional paperwork is
5. Typically, it’s the buyer who covers closing costs in a short sale, but like all things in real estate – anything can be negotiated. If you, the buyer, don’t cover those costs, then it’s the bank that pays those fees, not the homeowner.
6. Once the deed has been transferred, it’s time to move in. Just like in an ordinary closing, the current homeowners can remain in the home until the short sale closing or other agreed upon date.

If you are thinking about a short sales purchase, read our recent post about what to do before you purchase a San Diego short sale.

Distressed properties can be purchased at unbelievably low prices. If this is something that interests you, think about which type of distressed property purchase is the best option for you.

Foreclosure, short sale or REO (bank owned)

The most common type of distressed property in San Diego County is a foreclosed home. In this situation, the homeowner has failed to make mortgage payments and the lender has issued a Notice of Trustee Sale, which means that if the homeowner doesn’t pay up, the lender will receive  rights to the home and sell the house.

Foreclosure sales begin with a minimum bid that includes the loan balance, any accrued interest, plus attorney’s fees and any costs association with the foreclosure process. In order to bid at a foreclosure auction, you must have a cashier’s check in your hand for the full amount of your bid. If you are the successful bidder, you receive the property in “as is” condition, which may include someone still living in the property. There may also be other liens against the property.

In the case of a short sale, the lender has agreed to accept an amount that is less than the total sum owed on a property, which means the homeowner is able to sell the house without any negative foreclosure mark on their credit. The homeowner is usually facing financial hardship and is really just looking for a quick house sale.

A short sale purchase may be a more profitable option than a foreclosure purchase, since you do not have to have cash to pay off the mortgage loan or clear any title issues after the sale. Additionally, the home seller is easier to work with, because they are eager to move on and start fresh.

REO properties,

Another type of distressed property is a real estate owned (REO) property. This is similar to a short sale property, except that the property already belongs to the lender due to foreclosure. REOs are often regarded as the best distressed properties to purchase, because the property is free and clear of all title issues.

An REO (Real Estate Owned) is a property that goes back to the mortgage company after an unsuccessful foreclosure auction. You see, most foreclosure auctions do not even result in bids. Since what is owed to the bank is almost always more than what the property is worth, very few foreclosure auctions result in a successful sale. Then the property “reverts” to the bank. It becomes an REO, or “real estate owned” property.

If you want to learn more about purchasing a distressed property or making a quick house sale in San Diego, contact San Diego Short Sales ASAP.

We at San Diego Short Sales ASAP realize you are in the information gathering stage of your purchase and we respect your privacy.  Should you have any questions, please feel free to email us at durrell@oaktreerg.com or call directly at 760-576-4357.  If you or anyone you know is looking to buy or sell a home, please note that we can provide detailed information.

• Your first step is to home-ownership is to  contact a loan officer who is referred to you by someone you trust.  Buying a home is a big step and a big responsibility, so make sure you are dealing with people you can rely on to look after your best interests.

• Be prepared for your first meeting or phone conversation with your loan officer by having your most recent pay stubs, most recent bank statements, and W2s and tax returns from the last two years handy.   Having these items ready will help your loan officer to qualify you for the right purchase price and monthly payment.

• It is also very important to review your average monthly income and outgoing expenses.  Knowing how much money is currently coming in and going out will help you to determine what monthly payment you will be comfortable paying.  You want to be confident that you won’t be overextending yourself when it comes time to pay your monthly bills at your new home.  TIP—print out your last three bank statements and add up the amount of money that comes in and goes out of your accounts each month.  Look carefully at what items you may need to cut out in order to afford a new house.

NO surprises when your first payment comes in the mail.

• Be sure to ask your loan officer these important questions:  How long is the interest rate fixed for?  What are the terms of the loan you are offering me?  How much will my down payment be?  How much are your loan fees?  What will my total closing costs and out of pocket costs be?  What is the interest rate?  What will my total monthly payment be?  You need to be sure you clearly understand how much your total payment will be including your mortgage payment, property taxes, home owner’s insurance, and any HOA dues, mortgage insurance, or special property tax assessments.

Tania Shanahan

Loan Officer Prospect Mtg

Cell: (858) 248-3529

PS. Home prices in San Diego are affordable, and interest rates are still near historical lows.  Right now is a great time to buy a home.  As long as you are smart about your purchase and your mortgage, you will reap the benefits of home-ownership for years to come!!!