Liz Ellis SLO County Real Estate BLOG

How to Buy a Foreclosure.

Lots of people are interested in buying foreclosures in San Luis Obispo, Arroyo Grande, Pismo Beach and in paso Robles and Santa Maria.

I have been emailing and showing many foreclosures lately. I have folks who are receiving foreclosure lists via email on a regular basis. Finally when they see something they really are interested in, they sometimes find they are not prepared for the process of actually purchasing the foreclosed property. There are differences in the process of completing a foreclosure transaction versus a "normal" transaction. I'd like to lay out the differences and help you become more prepared when you find that "deal of the century" to go after.

First, lets overview a typical transaction. Then we'll highlight some of the significant differences when it comes to a foreclosure.

1. Get PRE-QUALIFIED with a good local lender
2. Find the right property, make an offer, usually LOWER than the listing price
3. Negotiate the price and terms with the seller using approved Realtor forms. Usually just your offer is being negotiated
4. Escrow begins
5. Conduct inspections and receive SELLER DISCLOSURES
6. POSSIBLE RENEGOTIATION after inspection discovery using Realtor forms/ or back out of the deal
7. Remove contingencies
8. Close escrow and own the property.

Now, here's the typical SUCCESSFUL foreclosure transaction. Remember, these properties are LISTED below market to get them to sell quickly.

1. Get PRE-APPROVED with a good local lender. This is a more involved process with the lender delving into your financial position
2. Find the right property, make an offer USUALLY AT OR OVER LISTING PRICE (not always though)
3. Receive a counter offer in the form contract addendum from the lender. These are the terms the lender wants.
4. Psychologically ready yourself for a possible bidding war, because there are usually more than one potential buyer
5. Escrow begins
6. Conduct inspections. Since there are NO SELLER DISCLOSURES AND THE PROPERTY IS SOLD AS-IS, so it is imperative to conduct thorough investigations. Foreclosed property is typically not well maintained, or outright damaged.
7. Remove contingencies or back out of the deal
8. Close escrow and own the property.

Although every transaction has its own special circumstances, the lists above sort of summarize the differences between the typical transaction and the foreclosure transaction. To be successful with the foreclosure, get PRE-APPROVED well in advanced of looking at property. If the property is listed to sell and is in a good location, you can be sure there will be other interested parties, so know where your upper limit is. Also be sure to thoroughly inspect the property during escrow so you know what deferred maintenance or property damage issues there are. Be prepared to accept the property as it is or to walk away from it.

Some areas I serve have many foreclosures, while other areas have just a few. Santa Maria has many newer homes listed as foreclosures. They tyically receive numerous offers and close significantly over the list price. Paso Robles is another area that has lots of foreclosures as well. San Luis Obispo does not have as many foreclosures.

Call or email me for specifics in the area you are interested in. My number is 805-801-5529.