Currently having two clients looking to purchase bank/lender owned properties and being in the process of listing another, now is a better time than ever to talk about court ordered sales - more commonly known as foreclosures. With the current economy being what it is there are more coming on the market which means more questions from buyers, and the misconception that everyone is gauranteed a deal. Before I explain the process of purchasing a foreclosure you must understand that although banks price these properties competivtely and sometimes under market value that does not gaurantee a deal. The bank knows the properties value and their intention is to get the most possible - the same way any other seller on the market would. What seperates them is the absence of an emotional influence almost every seller has with their home which means it should definetely be priced right. The secret to getting a deal? Well there is none, hope that you don't have as much competition or a so called bidding war and you can buy a home at a good value, many times under market value. Allow me to explain, let's start with the process.
Listing the property
This doesn't concern the buyer's but it's good knowledge. A bank files for a court order in the supreme court and once granted they now have the right to select an agent and list the property for sale. They will assign the duties to a lawyer to oversee the negotiations, drafting documents etc. You will notice however that most banks do not want their property description to include anything about the fact of it being a "foreclosure" or "court ordered", but the hints are there. Such as the phrase, " sold as is where is" or " the seller makes no representations or warranties about the property".
Showings and Offers
Now that the property is on the market for everyone to see, you make an appointment with your real estate agent to go and view the property. This is not different than any other showings, except for what is included in the purchase price. You will notice again that the property is sold in the condition it is in and the appliances are not included in the price. So now you're done viewing the home and you are ready to make an offer. What makes this different than any other offer? Well for starters is must contain "subject to court approval", the seller is not making any representations or gaurantees about the property, and the fact that you will have to go through court to eventually complete the purchase. Before we get to that stage though we have to make sure there is no current offer. If there is and it is not yet accepted you may always compete with them and try and get your offer accepted by the seller. Let's assume your offer is accepted, they will now tell all the interested parties, so all the other potential buyers know how much your offer was for. Why? Well this offer is still subject to court approval and at court they are expecting to get even more offers. So you must be wondering why be the first person to get the accepted offer when your competition will know what you have offered. Well, the initial offer can have subjects in it, meaning if you need to secure financing from a bank you can put that in, you have the oppurtunity to do a home inspection, and any other due diligence requried. So now you have had a chance to remove your subjects or satisfy your requirements. The bank will now apply to get a court date and all parties interested are informed of the time and date,which is usually 2-3 weeks after the removed subjects.
The court date
Now that the other potential buyers are aware of the date, they can bring their sealed offers, which may not contain any subjects, but must have attached their deposit via bank draft. This is your oppurtunity to bring another offer - sealed that is - and I recommend you have one extra offer with a blank price which can be used if you feel the turnout is greater than you expected. Once all the sealed offers are in to the judge, he/she will go through the offers and either select one or give an oppurunity for one last chance. This is completly at the judge's discretion so it's best to go in withyour best offer or risk not getting the property. If you are selected, the completion date for the home- if occupied- is ussually 30 days later or as early as 14 days if vacant.
Now you know the basics of court ordered sales. Interested in seeing what foreclosures are currently on the market in your area? Send us an email and we would be more than happy to send you a list of all the court ordered properties on the market!