Buying a foreclosed house can be an economical way to purchase your starter home. In some cases, repairs may be needed or kitchens might need some remodeling but despite those improvement costs, there isn't a cheaper way to purchase a house.
In recent years, the real estate market has enjoyed a bounty of foreclosed properties for first-time buyers and investors to scoop up. Home prices began to slide by June 2007 and by 2008, 2,800 homes in Sonoma County were lost to foreclosure. Distressed sales peaked at 76% of all homes on the market in February 2009.
The Great Recession, which began with the subprime mortgage crisis, forced too many families out of their homes, which often ended up in foreclosure or a short sale. The good news is that the worst of the foreclosure crisis is behind us.
Don't worry about losing an opportunity to purchase a foreclosed home. There's always an opportunity to get a foothold in real estate by purchasing a home at an auction.
And there is always someone who figures out a way to defraud the foreclosure system.
Northern California Investor Faces Conspiracy & Mail Fraud Charges
In early November, charges were filed against a Pleasanton investor named Chuokee "Joseph" Bo. He has agreed to plead guilty in the U.S. District Court for the Northern District of California in Oakland for his role in a conspiracy to rig public real estate foreclosure auctions and commit mail fraud.
Bo isn't alone. He was part of a ring of 38 individuals who conspired with others not to bid against each other. At each public auction in Alameda County, the group would designate which member of the group would place the winning bid.
The defendant is also facing charges that he used the mail to carry out a plan to unlawfully acquire title to certain properties sold at public auctions, to make and receive payoffs, and to divert money to his co-conspirators by holding private auctions that were only open to the members of the covert group.
According to the charges, these illegal activities began in August 2009 and continued until October 2010.
The purpose of the conspiracies was to suppress competition and to conceal payoffs. In addition, the group of conspirators paid and received money that should have gone to pay off the mortgage and other holders of debt secured by the properties.
8 Tips for Purchasing a Foreclosed House
If you are new to foreclosure auctions, consider these tips prior to making a bid.
- Timing is everything. Instead of joining a heated bidding session, wait until the bidding slows to make your own.
- The first houses auctioned might be the best buys of the day. Experts indicate that the initial properties sell for less as the day's bidders get a feel for pricing.
- Dress as though you were a banker. A professional appearance will serve you well.
- Don't attend an auction with the intention of purchasing one house in particular. Do your research and attend multiple open houses. Keep notes on the different houses so that you don't get confused.
- Consider taking your contractor with you as you look at several foreclosed homes. He or she can provide you with ballpark remodeling costs.
- Research the real estate market by doing your best to find out what other homes in the neighborhood are selling for.
- Make sure you're not purchasing a home that has liens on it.
- Consider auctions held by municipalities, which can be less complicated
The Law Offices of James V. Sansone offers a full range of family law and bankruptcy legal services. We are located in Santa Rosa, California and serve clients throughout Sonoma County, Mendocino County, and Lake County, including Santa Rosa, Petaluma, Cotati, Rohnert Park, Sebastopol, Healdsburg, Sonoma, Kenwood, Glen Ellen, Windsor, Bodega Bay, Ukiah, Willits, Clearlake, Lakeport, and Kelseyville.