Buying Real Estate at Foreclosure Auctions

Buying Real Estate At Foreclosure Auctions

To be successful buying land at foreclosure auctions, or more correctly Trustees Sales, you need to understand the foreclosure process. The process is long and complicated causing many to avoid them. Because of this, it is a great opportunity.

Understanding Foreclosure Process

You must understand the foreclosure process to be successful at trustees sales or foreclosure auctions. Understanding the process will help you decide the property in foreclosure, when the auction will be held and what a reasonable price is.

Finding Foreclosure Property

To buy at Trustee’s Sales you must find properties before the Trustee’s Sale. Trustee’s Sales are advertised in the paper before the sale, using a Notice of Trustees Sale. If you see the Notice the first week published you will have several weeks to research the property.

If you want more time to research you can review the Notices of Default recorded in the county recorders office. These are filed at least 3 months before a possible sale. The downside of using the Notices of Default is many of these properties will be paid and not go to Trustees Sale.

Know Property Value

You should know the approximate property value. The amount owed on foreclosure property is often higher than the properties value. If the amount owed is more than the property value – STOP! Don’t spend anymore time on this property.

Know Amount Owed

Before attending you should know the amount owed on the land. The first bid is made in behalf of the lender and will usually be for the total amount owed. If the amount owed is more than the property value there is no need to attend the sale. You don’t want to pay a premium for foreclosure property.

In a market of declining property values many of the properties at foreclosure auctions will be worth less than the amount owed. Be careful and don’t pay more that the property is worth. You may have to search many foreclosure notices to find an auction worth attending.

To find the amount owed you can call the individual or company handling the Trustees Sale. Their contact information will be in the Notice of Trustees sale published in the paper. If they refuse to give you the amount you can get a copy of the Trust Deed from the courthouse. You can estimate the amount by looking at the age and amount on the Trust Deed.

Research The Property

After you have found promising foreclosure candidates you should have a title search performed on the property. Unlike a standard purchase there is no title insurance on trustees sales so it is possible to buy land with title problems, or unpaid liens and mortgages.

Attending The Auction

If you find a property, at a good price, with no title problems nor outstanding liens, attend the auction ready to comply with the instructions in the Notice of Trustee’s Sale. This often includes certified funds at the time of auction for part or all of the bid price. Usually you must have a set amount at the auction and the rest within 24 hours.

The auction is handled like any other auction. Bids are taken and the high bid will win the property, subject to meeting the conditions in the Notice of Trustees Sale.

Buying property at foreclosure auctions is more difficult than many other methods. Because of this most people avoid them. This makes it possible to find excellent deals. It just takes work and preparation.

February 24, 2016

Owner Financing: the best real estate loan

Owner Financing: The Best Real Estate Loan

Owner Financing, also known as seller financing, is a real estate transaction where the seller is also the lender. Owner financed land can be any real property, although it is more common with land than houses or commercial property.

How To Setup Owner Financing

Seller financing is set up when the offer to buy land is negotiated. This is negotiated between buyer and seller with the help of any realtors. All terms are negotiable, including interest rate, payment amount, length of loan, and amount financed.

The interest rate is usually higher than the current bank interest rate. This is appropriate as there are no loan fees, which can be over 2% of the loan amount. Also, it is more difficult for the seller to sell the loan than it is for a bank to sell a loan.

Payments can be made directly to the seller or a payment collection company can be used. If the payments are made directly, the buyer and seller will calculate interest paid, current balance, and payoff themselves. The interest paid will need to be calculated annually for tax purposes.

If you don’t want to do this a payment or escrow collection company can be used. They will make these calculations and send an annual interest statement for tax purposes. They charge a setup and monthly fee for this service.

Documents Used

A transaction on owner financed land is similar to a bank loan without the fees. The same documents are used to transfer the property and secure the loan. The Lender is just the seller instead of a bank. A warranty deed is used to transfer the property to the buyer. The warranty deeds has warranties that the buyer owns the property free and clear.

A Trust Deed and Trust Deed Note is used to secure the loan to the seller. The Trust Deed is recorded with the Warranty Deed and includes the loan amount. The Trust Deed Note is not recorded but includes the loan terms such as interest rate, payment date and amount.

The Trust Deed can be foreclosed in the event of default. This is often a 3-4 month process and does not require a court hearing. The process varies from state to state.

Advantages To Buyer

The advantages to the buyer in this type of transaction include lower or no loan fees and financing without credit checks, appraisals or debt ratio requirements. The transaction is usually closed much quicker because of no approvals.

Advantages To Seller

The main advantage to the seller is the opportunity to earn interest which can be large depending on the amount, interest rate and length of the loan. It is also easier to sell your land, as it is difficult to get bank loans on land and few buyers have cash to buy real estate without financing.

The seller is also protected in the event of default as they can foreclose the property similar to a bank foreclosure. It is important to get a down payment that is large enough to cover foreclosure costs, any damage to the property and serve as incentive for the buyer to keep making the payments.

In the event of foreclosure the seller keeps all payments received from buyer.

Summary

Owner financing can be an excellent option for both buyer and seller. It offers the buyer an opportunity to buy land they otherwise couldn’t afford, and allows sellers to sell land in a market where cash sales are rare. And to earn interest in addition to the money earned from the sale of the real estate.

The seller is also protected as they can foreclose in the event of default, while the buyer becomes the owner at time of sale.

February 15, 2016

Real Estate Foreclosures in Utah

The real estate foreclosures process is long and complicated. The documents used in real estate loans are standard across the nation, but the process is governed by state law, making the process unique to each state.

This is an in depth look at real estate foreclosures in Utah. Keep in mind each state has differences.

Default

Foreclosure starts when a default occurs. A default occurs due to the action or inaction of the borrower or property owner. The most common default is failure to make payments, but is not the only default.

Breaking any agreement in the closing documents constitutes a default. These include not paying property taxes, not maintaining property insurance, destroying the property, etc. This is the start of a real estate foreclosure.

Trustee

Foreclosure auctions, or Trustees Sales as they are more correctly termed, are conducted by a Trustee who handles all phases of the foreclosure process. Trustees must be a attorney, title company, lending institution or certain government agencies.

Regardless of who is the original Trustee on the Trust Deed, it is usually changed to an attorney or title company when a default occurs.

Notice of Default

When a default occurs a Notice of Default is recorded at the county recorder’s office. A certified copy is also sent to the owner no later than 10 days after recording. The Notice of Default states what the default was. The lender must then wait 3 months before taking further action. During this three month period, the Borrower is allowed to correct the default.
Correcting the default would include paying the overdue payments including interest and penalties, paying the taxing, obtaining insurance or correcting whatever default occurred.

Notice of Trustee’s Sale

As the name implies a Notice of Trustee’s Sale is a public notice that a default has occurred and was not cured within the three month period.

If the default is not cured in the three months, the Trustee publishes a Notice of Trustee’s sale. This notice must be posted in at least three conspicuous places in the city or county where the property is located. It must also be posted on the property. It is then published in a local newspaper, once a week, for 3 consecutive weeks. The last publication must be at least 10 days, but not more than 30 days before the sale date.

During this period the borrower has the right to payoff the property but the lender is not required to accept just delinquent payments as during the Notice of Default phase.

Trustee’s Sale

If the default is not cured by the time of sale the Trustee holds the sale at the published location and time. The first bid is automatically placed in behalf of the lender and is usually the amount of the loan payoff plus interest, penalties and foreclosure fees. Anyone can bid at the Trustee’s sale as it is held as a public auction.

Funds to Purchase

To place a bid at a foreclosure auction or trustee’s sale, bidders are usually required to have certified funds for a set amount (often $5,000) and must pay the remaining bid price within 24 hours. The amount needed at the auction will be listed in the newspaper in the Notice of Trustee’s Sale.

Trustee’s Deed

After the auction is completed a Trustee’s Deed will be issued by the Trustee to the successful bidder. This deed conveys all interest of the Lender but may not convey all the property interest.

Conclusion

The real estate foreclosure process is painful for homeowners. For those looking for a great investment it is worth a look.