174 Vintage

[IrvineRenter_IHB]

awgee,





When there is a foreclosure sale, the property is put up for auction, and it is sold to the highest bidder. Amounts equal to the outstanding balance of the first mortgage will go to the bank, and the remainder will go to any other mortgage holders with claims against the property. If there is any left over, it goes to the home owner; however, this almost never happens because if there was any equity left, the owner wouldn't have let the property go into foreclosure.





Banks will bid the amount of their outstanding first mortgage. If this is high enough to buy the property -- which is usually is -- it becomes real estate owned (REO) by the bank. They will then sell it to try to minimize their losses. Sometimes, banks will decide to accept less than the amount owed at the open auction as a loss mitigation measure, but this is rare -- even when it is in the banks best interest. Banks all develop loss mitigation policies, and this policy tells them to buy the property for the amount of the first mortgage, so that is what they do.





To more directly answer your question, "<em>If $400,000 is owed on the property, and the lender bids $400,001, and someone else bids $400,002, would the someone else get the property for $400,002?</em>" Yes, the bank will not bid more than the amount owed. They don't want to own the property, they want their money back. This is why there are sometimes deals on foreclosures.

 

[penn1_IHB]

a lot of newbies who hear about this foreclosure business think that there are all kinds of deals, and money to be made in foreclosures. Trust me, these are not common and if you want to play in this game you better know what you're doing otherwise you could get burn very easily. Think about it, if their is equity in the home don't you think the owner would want to sell it themselves before going through foreclosure? If a deal is too good to be true, it probably is--be weary of construction defects, other liens.... The pitfalls are large and costly. Finally, there are just too many other seasoned pros out there i.e. Graphrix, that would not let a "good deal/quick buck" slip through the cracks. My advice is stay away, it's not worth the time, headache, heartache and stress.

 

[graphrix_IHB]

<p>penn1 - Thanks for the compliment of being a seasoned foreclosure pro but by no means am I a pro. I have only snagged one up before it went to auction only because the owner liked me more than the snakes out there. Other than that I am just watching the market and may join in once like you said there are actual deals out there. </p>

<p>awgee - We all come here for information and that is what the blog and forums are for. I wouldn't have nearly as much knowledge about the secondary mortgage market without <a href="http://calculatedrisk.blogspot.com/">http://calculatedrisk.blogspot.com/</a>. I think you brought up a good point in that the foreclosure process is not known by many because it has never involved them.</p>

<p>So I have decided to start a topic on foreclosures. I will have the process info in there with updates on the amount of NODs and some interesting properties.</p>

 

[acpme_IHB]

penn1 makes a great point. buying foreclosure properties is no different than any other RE investment (or any kind of investment for that matter)... in other words, you better know what you're doing! if it's such easy money there'd be way too many other people and possibly scamsters in the game that make it not worth your while unless you intend to really spend a lot of time and energy on the effort to be better at it than others.





but just because its in foreclosure doesn't automatically mean a good bargain.