Foreclosures have been all over the news lately -- bad if you're selling, good if you're buying, right?  Maybe, but here's the straight scoop: 

The term "foreclosure" can refer to properties in the foreclosure process, but still owned by the homeowner, or those that have actually been taken back by the bank.  The former is in the category of "distress sales", which can also include those where the total liens on the house exceed the value of it, also known as a "short sale", and where the lender must agree to take less than he is owed.  There isn't room here to discuss this aspect in detail, but if you call me I'll be glad to get into it with you. 

Back to bank-owned foreclosures, known as REO's (real estate owned).  The general public impression is that these are sold real cheap and wreck the market for sellers while providing opportunity for buyers.  Either of these can be true but, barring a market where foreclosures are rampant (which is not the South Bay), foreclosures are not the "steal" they may appear.  First of all, when a homeowner is in financial distress, which is generally the case when he's losing his home to the bank, he usually doesn't have the money or inclination to keep the place up.  Paint peels, landscaping is overgrown or dies, routine maintenance on the property is not performed, primitive forms of life appear in the pool, etc.  By the time the bank actually takes title, which can be 9-12 months, the place can be in a pretty sorry state.  Once the homeowner realizes that the bank is actually going to take his home from him, he probably at least takes the bank off his Christmas card list, and may take other action, such as removing the appliances, toilets, sinks, and anything else of value.  Depending upon his level of bitterness, holes may appear in the walls and doors, windows may somehow break, concrete may find its way into the drains, etc.  The message here is that foreclosures are usually somewhat less than the steal they appear to have been simply from the square footage or location, and may require north of $100,000 just to be livable.  

The other thing to consider is that the banks are not in the business of giving their REO's away.  The bank has an obligation to its stockholders, and the person at the bank charged with disposing of the properties is reviewed on how efficiently he performs his job, which includes how high a price he is able to obtain.  As a buyer, you generally must buy these properties "as-is" after your inspection; the lender/owner will usually not make any repairs, as he is already losing his shirt.  

Lastly, buying foreclosures is no big mystery.  They are on the market like all other homes for sale, since the lender/owner wants to get the most he can for them and knows that maximum exposure is the way to do it.  Anyone who says he has a "secret list" of foreclosures is trying to "hook" you as a buyer into working with him, and it's simply not true.  Why would the seller limit the property's exposure this way?  Answer:  he wouldn't.

If you want to consider buying a foreclosure, or have any other questions, give me a call at 310 613-1076.