Save your time and reputation by tracking the foreclosure status of your listings, offers and rentals.
Suppose a buyer comes to you wanting to make an offer on a house. Before you move forward, research the property to find out if it is involved in foreclosure. One short check can save you a lot of work and possibly some embarrassment.
Based on your research you can advise the client and set expectations, such as timelines if it is in foreclosure.
If you manage rental properties, you can check the status of a property to make sure the owner hasn’t been served a notice of default, which could mean trouble for new renters and for you.
Oftentimes sellers do not understand the foreclosure process and are unaware of their current status and what that means. It is critical that you track the foreclosure status of all properties you have listed. This avoids surprises and demonstrates your expertise in understanding the market. Losing a home in foreclosure is a very stressful situation. The fact that homeowners can depend on you to track their foreclosure status and answer questions can be very comforting.
Don’t Waste Time on Deals You Can’t Close
Before you go on a listing appointment, do a Foreclosure Search to see if it’s in foreclosure. If so, the status will give you and your client an idea of what can be accomplished. For a potential listing, it will tell you whether there is enough time to list and sell the property. For a potential buyer, it will tell you whether there is enough time to make an offer and close, and if the owner has equity or if a short sale is required.
Preforeclosure: A notice of default has been filed. We provide a projected sale date that is the approximate date the property could go to auction based on regulatory requirements. The actual date is not set until the default period expires and the Notice of Trustee Sale is recorded. We show all preforeclosures as active for 120 days by default. If the Notice of Trustee Sale has not been recorded within 120 days, then the foreclosure record is moved to historical records and can be accessed by checking the box “Include historical records.” A Notice of Default does NOT have an expiration date and can sit dormant for years until the Notice of Trustee Sale is filed.
Auction: A notice of trustee sale has been filed. The sale date is the scheduled auction date. The published bid that appears on this notice is the amount owed on the foreclosing loan at the time the notice was prepared, including principle, past due interest and foreclosure fees. A sale date can be continuously postponed for up to one year before a new notice must be posted, published and recorded.
Bank Owned: The foreclosing lender gets to make the first bid which is called the opening bid, or drop bid. This bid amount can be substantially lower than the published bid or it can be higher if the lender chooses to add the additional interest and fees that have accrued since the Notice of Trustee Sale was prepared. If no bidders placed a bid above the opening bid at the auction, the lender now owns the property. The sale date is the date the sale took place. The estimated value (AVM) and winning bid give an indication of the level of discount lenders are making.
Sold to Third: A third party, such as an investor, bought the property at auction. An investor can bid as little as a penny over the banks highest bid. The sale date is the date the sale took place. The estimated value (AVM) and winning bid give an indication of the margins investors stand to make.
For preforeclosure and auction properties, it’s important to understand the outstanding loans against the property, such as what the current owner paid for the property, the lenders that originally made the loans, as well as any other liens against the property or the homeowner. It is also important to know whether or not they were purchase money loans. There can be legal and tax consequences that are specific to their current situation that must be addressed for a homeowner to make the best decision for their situation.
A little research gives you enough information to know how much time is left before a property is lost to foreclosure, whether pursuing the listing is a good use of time, or if you need to contact the seller’s agent (if the property is scheduled for auction) to verify that they have a plan to delay the sale long enough for you to close escrow.
Make Sure It Doesn’t Sell Out From Under You
If you make an offer on a property in foreclosure, continue to check as you are in escrow to make sure the property isn’t sold at auction, undermining all your hard work. Don’t assume that because the loss mitigation has negotiated a short sale that anybody has told the loan department, because they haven’t. See Tales from the Trenches: Never turn your back on the ocean in the List Distressed Properties section for more information about why this is important.