Foreclosures & Property Management in SF
Although the economic depression has led to the decrease in real estate purchase prices, buying a property today it still is expensive and fewer and fewer people can afford to pay the price. Why?
Not only have property prices dropped, but also the purchasing power of the consumer. This is perhaps the main reason why more and more real estate investors are tempted to buy foreclosures instead of paying the full price for a San Francisco Bay Area home.
Most of the foreclosed properties in San Francisco, San Jose, Santa Clara, Redwood City and the Bay Area are sold for less than their whole selling value because of one main reason. These properties are not sold for a profit, but to cover the debt owed by their previous owners to the banks.
There are still very many real estate investors who want to make good deal out of buying a property and don’t know how to buy a foreclosure at a great price. This is why we have figured this article can be useful for everyone who wishes to invest in real estate, make a great bargain or buy their first home in the San Francisco Bay Area.
Keep in mind that there are great opportunities out there, as well as pressures traps that come along, so you need to be really informed and play it as safe as possible because we’re talking about a lot of money here.
First and foremost you need to carefully decide in which state of foreclosure you want to buy a property, because you have 3 options at hand:
- Sheriff’s auction;
- Repossession, also called REO (for real estate owned by the bank);
Rick Sharga, the spokesman for RealtyTrac has stated that “The safest and best way to buy is when it’s a bank-owned property,”, however, each of these three buying options have their advantages and shortcomings as well. Let’s go through each and everyone so you can see the bigger picture of what buying a foreclosure means.
The first stage in which you can purchase a foreclosed property is the pre-foreclosure. This means that the property is in the process of being foreclosed but they haven’t yet been sent to auctions. In most cases the owners of these properties own more on the homes than their actual worth and they wish to unload them. In this stage of the foreclosure the interested buyer needs to negotiate with both the property owner and the lender. This means that the process itself can get really slow and at times too complicated. Still, one of the biggest advantages of buying a house in this stage is that you have the possibility to see and inspect the home before making the purchase. And then there’s the shortcoming: in this stage property prices are normally higher than in the other stages of foreclosure.
2. Sheriff’s Auction
In you’re not really decided on the pre-foreclosure, then there’s option number 2 available, the sheriff’s auction. The biggest advantage of buying a foreclosure in this stage is that they usually have the lowest prices comparing to the other two stages. Still, the biggest throwback is that you can’t inspect the houses and see what they hide between their walls and you can end up buying a property that comes with bigger repair costs than its actual worth. Hence, this stage is often times taken over by contractors and investors who regularly bid on these places and know how much to pay and what to expect.
And then there’s stage number 3, the repossession. The repossession happens when the house or the property didn’t sell at the sheriff’s auction and in this situation it is taken over by the bank. Although homebuyers may not buy properties at a dumping price in this stage, they can almost certainly get to investigate and inspect the house. This way they can make a clearer picture regarding the actual value of the property and minimize costly surprises.
Another plus is that the property comes with a clear title and that may extend preferential financial terms, meaning that they might undergo some repairs before putting the property for sale. However, in this “safer” stage homes are usually sold exactly as they are, whiteout any “cosmetic retouching” except some cases of health and safety issues. This makes the home inspection even more critical. And then there’s another advantage that you have when buying a property in this stage. The fact that you buy it from a corporation, which is the bank, and not from an individual, you can enjoy a quick move in and a fast buying process. However, banks are banks and they always have the super small writings at the bottom of the page with all sorts of amendments. So, make sure you’re not charged with any per diem fee for late closings, as it often times happen.
And here are a few foreclosure buying mistakes to avoid:
- Don’t Make Rash Bidding Decisions – Some people will be frenzy to bid when they see the low starting price of the auction. Don’t get caught up in this frenzy, it usually leads to buying the property at a much higher price than its value.
- Don’t Underestimate Repair Costs – Another thing to keep in mind is to make a realistic evaluation of the home repair costs and not jump into conclusions. This means that you really need to take your time when inspecting a property and consider a 10% to 20% of the property cost for unforeseen repairs.
- Don’t Buy in an Area Full of Foreclosures – If you don’t want to regret making a home buying, don’t go after neighborhood flooded with foreclosures because in these areas the property prices can drop even faster. Buy in an area in which most homes are not foreclosed.
Once you have purchased a foreclosure, you should hire a San Francisco Bay Area property management company to handle the renting process as well as other duties such as bookkeeping, inspections, legal aid, administration, financial processing, evictions and financial services.