I came across a great article in the San Francisco Chronicle about foreclosures and bank owned properties.
I am often asked about these types of property by clients looking for a good deal, and let’s be honest, we’re all looking for a good deal. But like anything that might appear great on paper there are trade-offs. These two categories, foreclosures and REO’s [real estate owned by the bank] are very different from short sales because in these cases the homes are owned by the bank.
If you want info on foreclosures let me know – the title companies all publish the NOD [notice of default] lists that I’m happy to share with you. Foreclosed homes are sold at auction and in my experience you need to pay cash that day. You get no inspections, no preliminary title report and all due diligence needs to be done upfront.
REO’s are sold on the market just like normal homes except that there might be longer turn around times for offers and you will get no disclosures. Banks also will likely have a lengthy disclaimer that basically says buyer-beware, and the bank knows nothing about the property.
Is it a good deal?
That’s a hard question to answer but in Portland I just don’t see it being a great deal yet. The main reason is that we just don’t have enough defaults in the area to create the inventory needed for big discounts. If the banks only own a relatively small amount of homes they don’t have the motivation to sell them quickly which means they go for close to market value.