Posted by: Timothy Ellis (The Tim)

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

21 responses to “How-To: Find Bank-Owned Homes”

  1. softwarengineer

    I’m Sure There’s a Few Realtors, Attorneys and Such That Grabbed ‘Em Up With Cash Tim, Before They Went on Auction Too

    RE: real bargains with old principles below $100K and the owners went default anyway.

    But where’s these real deals out there for cash [I'm talking 50% or more reduced in price]? Also, if they’re bank owned and have old principle loans in the over-priced pipedream catagory [like most of them IMO], will the banks even let them go on bargain 50% off cash offers today….I seriously doubt it Tim.

    The banks have too many “over-priced” outstanding loans and to admit a lion’s share of homeowners are all upside down the last 15 years would topple the Banksters’ Pyramid Scheme.

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  2. Kary L. Krismer

    Good piece. I would add that buying at the foreclosure has significantly greater risk and is not for the average Joe.

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  3. David Losh

    A lot of people are interested in foreclosures, but there is always a good deal to be had, if you are willing to buy a good deal, rather than the perfect family home.

    Real Estate is a business. If you buy for profit you can always find something no matter what the market place is doing, or what people say.

    Dealing with banks, is dealing with professionals. This is all dollars and cents. You need a business plan you can stick with. Get your financing nailed, and be ready to close.

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  4. Dogggis

    I bought my house last year, it was a bank-listed foreclosure. It was on the market for 5 days when I first saw it. Talking to my neighbor who is an Agent, he told me that the house went through all the steps, of short-sale and then to auction. He said at the auction it was listed as a “Hot Buy” because of the low price, but nobody wanted to buy it because the owners were still occupying it and they didn’t want to have to deal with the eviction. So they were eventually evicted and then the bank listed the house at their bottom price. Someone put an offer on the house on Friday, we put our offer in on Saturday. The bank saw both the offers Monday morning, counter offering to the both of us, also asking for our “Best and Final Offer”. We just accepted their offer, which was a tiny bit more than our offer. Our offer was accepted by that Wednesday, so the bank was really moving to get our house off their books.

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  5. Hector

    Redfin is how we found our bank owned home, and we bought it for 68% of what the last owner did (and 10% less than the banks asking price). No eviction, clean house, gated community, etc. Even though Redfin may be the last stop, it’s definately not a bad stop as it’s an amazing tool for Joe Average Buyer.

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  6. Whidbey Islander

    Another possible way to find good deals is to talk with your local friendly agent about what foreclosure-specialist realty companies they hate to deal with, and see what listings they have. This only works if you want to jump through their special hoops, but if you’re willing, you might do OK.

    For example, there is a under-current-market property near us we would have bought for $30K more than the current asking, but the company selling it has such poisonous terms that my wife didn’t want to deal with it. Meanwhile, it drops $10,000 every two weeks because no one wants to deal with the listing company.

    The listing company is one of those huge concerns that does nothing but repos and really, really is looking for all cash offers.

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  7. Bill Johnson

    My rental house is up for auction in November. We have chosen to stay in the rental b/c we have gotten the security deposit back and are willing to stay until we are forced out. We are assuming the house will not be sold at auction b/c its value is likely worth about 350K and the mortgage is closer to 370 with outstanding delinquincies at about 20K. The house was purchased by the landlord 20 years ago for 125K. Will the landlord be held accountable for taking out so much money against the house and then letting it go into foreclosure? This seems criminal. Can I report him somehow?
    Also, the auction date is in the middle of the month. Can I pay that month’s rent up until that date to him, or do I have to pay the whole month, knowing he will not be the owner after the auction date?

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  8. Ira Sacharoff

    RE: Bill Johnson @ 7
    Once the auction happens, you are allowed to stay in the house for 90 days after the auction date, I think in all of WA state.
    I don’t think there’s anybody you can report your landlord to. Sounds like he was really stupid, but stupidity is not a crime.
    If you go to one of the foreclosure websites like propertyshark.com or usa-foreclosure.com, you should be able to find out if the auction date has been delayed or canceled.
    If you find out for sure that the auction is going to happen as scheduled, a lot people in that situation wouldn’t pay any of that last month’s rent. I’m not advising to do or not to do that, but I know people who have chosen not to pay their last months rent, and they suffered no consequences as a result.

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  9. Jillayne

    Regarding pre-foreclosures, “From there you can contact the mortgagor or the bank to attempt to purchase the property.”

    If a home is in pre-foreclosure, technically, the bank is not in title yet and cannot convey the property to another person.

    So a person wanting to buy a home pre-foreclosure would first want to check to see if the home is listed for sale with a licensed real estate broker and ask for a showing to check out the condition of the property first.

    If the home is not listed for sale, well then a buyer would need to deal directly with the person who is in title to sell and convey…..and I highly recommend first becoming familiar with our state’s Distressed Property Law, the law Kary loves to hate.

    http://apps.leg.wa.gov/rcw/default.aspx?cite=61.34

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  10. Jillayne

    There ARE some deals out there happening AT auction. Sometimes the lender/servicer slashes the opening bid the morning of or night before the auction. The big challenge is knowing the condition of that particular property before bidding.

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  11. David Losh

    RE: Jillayne @ 10RE: Jillayne @ 9

    There are a couple of guys I’ll be seeing next week who buy, and sell preforeclosures by negotiating with the banks directly on behalf of the owner, and new buyer. I was horrified when they first outlined the program, but now, a couple of years later, it makes more sense. The seller occupies the property, gets away pretty much cleaner than short selling, and it is all done away from public scrutiny.

    If you are buying at auction, which is a job in itself, you do look at the properties before the auction. Dean Street at John L Scott has a program that tracks auction properties. It costs money to use his program, but I know guys who have been very successful with it.

    It really was good of you to bring this whole bank owned property thing up because I think this will be a big part of the business in the next few years.

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  12. Bill Johnson

    RE: Ira Sacharoff @ 8

    Thanks Ira. That’s helpful.
    In this situation do you know if you pay rent for the 90 days after the auction?

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  13. Kary L. Krismer

    By Jillayne @ 9:

    If the home is not listed for sale, well then a buyer would need to deal directly with the person who is in title to sell and convey…..and I highly recommend first becoming familiar with our state’s Distressed Property Law, the law Kary loves to hate.

    http://apps.leg.wa.gov/rcw/default.aspx?cite=61.34

    This thing has sort of fallen off the radar, wish is sort of sad, because even with the amendments it’s still a drafting nightmare since it was drafted by amateurs. More really needs to be done so that it makes any sense at all, but now that it doesn’t affect real estate agents as much, and that equity skimming is largely a thing of the past, no one cares. But when someone is injured and the attorney tries to sue the person causing the harm, it won’t help that there are circular definitions and other problems that possible keep it from being an effective tool.

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  14. Kary L. Krismer

    By Jillayne @ 10:

    There ARE some deals out there happening AT auction. Sometimes the lender/servicer slashes the opening bid the morning of or night before the auction. The big challenge is knowing the condition of that particular property before bidding.

    Which is where you have an advantage if the house was listed first. I’ve be extremely reluctant to bid on a house that you had not been in at all. You would still have the risk of vandalism, but you should have some idea of deferred maintenance, etc. if you had gone inside (and even looked in the attic and crawl space).

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  15. Kary L. Krismer

    By David Losh @ 11:

    RE: Jillayne @ 10RE: Jillayne @ 9 – There are a couple of guys I’ll be seeing next week who buy, and sell preforeclosures by negotiating with the banks directly on behalf of the owner, and new buyer. I was horrified when they first outlined the program, but now, a couple of years later, it makes more sense. The seller occupies the property, gets away pretty much cleaner than short selling, and it is all done away from public scrutiny.

    What do you mean the “seller occupies the property?” Do you mean the original owner? I’m not as familiar with the distressed property law as I once was, but if that’s what you mean I’d suggest having any buyer consult an attorney for possible DPL risks.

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  16. Kary L. Krismer

    RE: Ira Sacharoff @ 8 – First, I’m not sure the 90 days applies to all foreclosures. Part of the problem is that there’s state and federal legislation, and they don’t match up perfectly.

    Second, you can never be sure that the foreclosure will happen. They are often delayed, sometimes unexpectedly for no apparent reason.

    Third, if the period you can stay is longer than one month, I don’t know why anyone would quit paying their rent. That can have consequences (e.g. an unlawful detainer being filed against you which can affect your ability to rent in the future). I would note though that either the state or the federal legislation doesn’t require the payment of rent after foreclosure in some circumstances, and that it’s even possible that the new owner won’t want the rent to be paid to them. Bottom line is that the decision to not pay rent should only be done after consulting an attorney.

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  17. David Losh

    RE: Kary L. Krismer @ 15

    Yes, the original owner is the one who starts the process. Yes, the bank is the seller. I will talk with them again next week on how it all works, but as I said, when they first told me what they were doing I was horrified, but the process has been looked at repeatedly. What I do know is that one of the partners does put up a cash purchase from time to time.

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  18. Ira Sacharoff

    By Bill Johnson @ 12:

    RE: Ira Sacharoff @ 8

    Thanks Ira. That’s helpful.
    In this situation do you know if you pay rent for the 90 days after the auction?

    You’re certainly legally supposed to be paying rent. And there might be differences if you have a lease or are on a month to month tenancy.
    The folks I know were contacted by the new owners and offered a deal that if they could get out in 30 days that would be a free month, and this was after they withheld rent to the owner who was foreclosed upon. They worked out a deal where they stayed 45 days rent free after foreclosure, but at the very least you’d want to be in touch with the new owners. In the case I’m referring to, the house was purchased at the foreclosure auction to an individual, not the lender.
    In some cases, the new owner would want to continue to have you live there for many more months, but in a lot of cases they want you out.
    In most cases when a foreclosure notice is posted, the auction gets delayed.
    And, like Kary said, talking to an attorney is always a prudent thing to do. I am simply relating a story that happened to people I know, not dispensing legal advice.

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  19. Kary L. Krismer

    By Ira Sacharoff @ 18:

    By Bill Johnson @ 12:
    RE: Ira Sacharoff @ 8

    Thanks Ira. That’s helpful.
    In this situation do you know if you pay rent for the 90 days after the auction?

    You’re certainly legally supposed to be paying rent. And there might be differences if you have a lease or are on a month to month tenancy..

    As I mentioned, either the state or federal statute on this seemingly doesn’t require the payment of rent, so if you fall under that you might not have to pay. But beyond that, the new owner accepting rent creates a landlord/tenant relationship, which might not be something they want. Again though, before any decision is made, an attorney should be consulted.

    I took a CLE on this when they were just going into effect, and there was a lot of uncertainty at the time as to exactly how this was going to work. Several months later I emailed an attorney with a specific question, and her response was that my guess was as good as any. Since the state rushed their legislation through, knowing the feds were going to act, but not knowing how, it created a lot of uncertainty.

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  20. Marc

    RE: Bill Johnson @ 12 – I would emphasize the point that Kary brought up regarding unlawful detainer, i.e.,, an eviction lawsuit. You really want to avoid an unlawful detainer action being filed against you. It’s a public record that any decent tenant screening company will find and it can seriously impact your ability to rent another home. Even if you win the suit, the very fact that a UD was filed can be very detrimental to future ability to rent.

    As for when a tenant must be out after a foreclosure, I haven’t had occassion to reconcile state and federal legislation on the issue but I’d be inclined to disagree with a blanket assertion that a tenant gets 90 days after foreclosure. I would proceed with caution and consult an attorney if you want to test the boundaries.

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  21. Marc

    I was just looking at the Google map of foreclsoures and noticed one in Magnolia that might be a steal. It’s in a killer south bluff location, probably has a view of the Sound and, according to the Notice of Trustee Sale filed in June, is set to be auctioned for well under $500,000. It’s possible that this is a junior lienholder but the loan amount seems too big to be a junior lien.

    It doesn’t look like the owner has ever tried to sell the home on the MLS (although I vaguely recall seeing a FSBO sign in front of a house in that area). I can’t help but wonder if the owner understands that he or she might have good alternatives to foreclosure. I would think a house in this location is surely worth over $500,000. Maybe it’s a rental that’s been trashed (but even then I’d think the dirt is worth the $450k stated on the NOTS).

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