South Bay and PV Penunsula Real Estate Agent Home Page

Foreclosures/Bank Owned Properties/Short Sales

Go to links at bottom of page to view LA County Notices of Default and Trustee Sales  

When you pick up the newspaper or turn on the news you will often read or hear about the record number of foreclosures in southern California.  Yes in the region foreclosures are up, but in the South Bay there are still very few foreclosures.  You see most of them where the subprime lending was prevalent or values have dropped significantly.  These areas are Carson, Gardena, Hawthorne, Lawndale, Wilmington, some areas of San Pedro, Harbor City and the city and county strip areas.  In areas where more conventional financing was used to purchase and values have not dropped much (or at all) there are very few foreclosures.  These areas are the PV Peninsula, the Beach Cities, most of Torrance, and some areas of San Pedro. 

What is foreclosure?  Foreclosure is a way for lenders, who have secured the borrowers property with a trust deed, to get ownership of the property if the borrower is not making payments.  There are two types of foreclosures.  Judicial foreclosures and private foreclosures.  Private foreclosures are the most common and this is what we will discuss.

If a borrower stops making payment the lenders first step is to make threats to get the owner to pay.   If the borrower does not make payments the lender will file a Notice of Default.  This notice is given to the homeowner and must also be published in some public place.  The Notice of Default notifies the borrower they are behind on the payments and if they don’t pay up the property may be sold at auction.  The notice includes the Trustee (a neutral third party that handles the foreclosure process), the Beneficiary (the lender), and the Trustor (borrower).  Also included are the property address, the loan amount, and the amount delinquent.  What is not shown is which trust deed is in foreclosure.  It could be a first TD, second TD, etc. 

If the borrower does not satisfy the delinquency within 90 days of it being posted a Notice of Trustee Sale is posted.  The Notice of Trustee Sale notifies the borrower that their property will be sold at auction 21 days from issue.  The information in the Notice of Trustee Sale includes much of the same info as the Notice of Default plus the sale amount and the place and time of the sale.

Trustee Sales are in a public place and the winning bidder must pay in cash or cashiers checks.  The initial sales price is what is owed plus any late fees and fines etc.  The buyers of these properties need to do extensive research to determine how much they will pay at auction.  They see what loan is being foreclosed on and if they will be responsible for any senior loans.  They also calculate how much they will need to put in to the property to make it livable or to get it in saleable condition if they are planning on reselling and they determine the market value of the home.  If more is owed on the property is worth then no one will bid on the property.  If there is upside potential there will often be many bidders going for the property.  If no one bids then the bank takes them back.  They are then categorized as Bank Owned or REO properties.

How do you purchase these distress properties?  There are four common ways to purchase these properties and all of them you need to do a lot of homework and it is advised you use the help of a real estate agent such as myself. The first is to approach the seller directly after the Notice of Default has been issued to see if they are interested in selling.  This can be risky. You need to figure what the property is worth, how much is owed including taxes, how many loans are on the property and what position the loans are in, and what the legal ramifications of purchasing a property in foreclosure.  If it makes sense go for it.   

The second is purchasing a property that is Subject to Short Payoff.  These are situations where more is owed on the property than the property is worth. These properties are usually put on the market at a really low price. The negotiation takes place between the buyer and seller but the closing is subject to the lender accepting less money then what is owed.  This can be very agonizing for a buyer because the bank may take a long time to make their decision to accept less money and at the last minute say NO or yes with a lot of condition like raising the price or even deciding to sell it to someone else.  The reward of purchasing a home subject to Short Payoff is you may get a great deal.

The third way is to approach the bank directly if they get the property back at the Trustee Sale and make them an offer.  Most lenders already have know how much they have to put into the property to get it ready to sale and they know the approximate market value when they get it back at the Trustee Sale.  They know how much they would sell it for. Make them an offer and see what happens.

 Many times the lenders elect to put their Bank Owned homes on the market. Once the bank owns the property they hire a real estate agent to get the property ready to sale and put the home on the market at a price that is usually right around the market value.  These properties are put on the MLS and it usually marketed as a Bank Owned or REO property.  Some times these come on the market under market value and it is a good idea to make an offer right away before anyone else does.  If these properties don’t sell the banks will usually keep lowering the price until they do.  Often times banks will sell there inventory at great prices on the open market and the buyers will get deals.  Drawbacks are the bank has absolutely no duty to disclose any problems to the potential buyer so the buyers of bank owned property really need to a thorough due diligence inspection. 

Included on this page of my website is a list of all the Notice of Defaults and Notice of Trustee Sales in LA County.  Whenever my list is updated I will update the website.  If you have any questions about these properties call or email me.

Over the years I have helped many buyers purchase Bank Owned and properties being sold Subject to Short Payoff.  I would like to put my expertise to work for you.