Distressed Property FAQ

Foreclosure Properties		Bankruptcy Sales
In California, when a property owner fails to make payments on their mortgages, the lender typically follows the nonjudicial foreclosure practice. The lender first must record a Notice of Default on the title of the property. When that Notice is recorded it is public information. My blog allows you to research to see what properties in the area have Notice of Defaults recorded against the title. These properties may or may not be for sale in the Multiple Listing System (MLS). These properties may proceed to foreclosure or a number of other possibilities may occur that could forestall or eliminate the foreclosure process, including among other possibilities, the owner curing the default, the owner selling the property, or the owner filing bankruptcy. In some cases, these defaulted properties proceed to foreclosure and after 90 days, the lender can record a Notice of Sale and a foreclosure hearing can be held 21 days later. At that sale the bank, a junior lender or a third party may bid to purchase the property Buying a home prior to the foreclosure sale may be subject to Equity Purchase laws (an equity purchase transaction occurs when a one-to four unit residential property occupied by the owner as his principal residence is in foreclosure due to a Notice of default and is ten acquired by a buyer for investment (rented) or dealer (resale on a flip) proposes)with special rules allowing the seller cancellation and rescission rights. . The process of purchasing a property at or before a foreclosure sale is fraught with pitfalls and one is well advised to retain the services of an attorney knowledgeable in the foreclosure process, as well as an experienced licensed attorney.		A borrower when faced with a pending foreclosure sale may file a bankruptcy action to have his debts discharged. An automatic stay occurs as soon as a borrower files bankruptcy, staying all actions against the borrower. While a petition for bankruptcy can have the effect of delaying a foreclosure, it odes not necessarily prevent a foreclosure from eventually occurring. A seller may place his property for sale during this process. The sales process may control by the seller or by a bankruptcy trustee depending upon the type of bankruptcy filed. Most sales of property occurring while a bankruptcy action is pending will be subject to approval of the U.S. Bankruptcy Court, and will typically require a noticed motion, a hearing, and an opportunity for overbidding. Tracking the properties offered for sale in MLS with pending bankruptcies is not always possible, but those properties that are identified as such are shown in the weekly updated link on my blog. Short Sales A short sale is the sale of a property for less than the amount of the loan(s) secured by the property. The consent of the seller’s lender(s) is necessary because without it there would not be enough money from the sale to pay off the lender(s) in full and pay other costs of the sale. Such transactions must be arm’s length and all terms of any benefit conferred on the seller must be fully disclosed. Short sales are often difficult transactions taking considerably longer than a typical real estate transaction to complete. There is no guarantee that the lender(s) will agree to the terms of the purchase offer or that they will responding any timely fashion or even respond at all. The properties may be in default (in the foreclosure process) already. The short sale link provided on my blog is updated weekly and shows all of the short sale properties offered for sale in MLS.
REO Sales
After the bank has taken title to property through a foreclosure sale, the bank typically lists the property for sale with a licensed agent and the property is listed in MLS. The REO link on my blog is updated weekly and shows all of the REO properties offered for sale in the MLS. Each bank has its own procedure for consideration and acceptance of offers and a buyer is advised to retain the services of a licensed real estate agent and attorney.