Foreclosures & Short Sales
Buying a Foreclosure in Los Angeles
May 6, 2010 by Jane Peters · Leave a Comment
Buying a Foreclosure in Los Angeles is not an easy process and not for the faint of heart.
There are three stages of buying:
Pre-foreclosure:
This is when the home is in the process of being foreclosed on but has not been sent to the auctioneer’s table. This kind of sale is a short sale but can be a long, drawn-out process of negotiations. The Seller is under water on his or her mortgage and is trying to offload the home. The first part of the process involves a contract agreed upon by the Seller, but then the Seller and their agent have to deal with the bank which is taking a loss. Often these sales can take months and may never come to a successful conclusion. This makes absolutely no sense since the alternative is another foreclosure in the bank’s portfolio and an even bigger loss.
Sheriff’s Auction:
When buying a foreclosure in Los Angeles, this is where homes will go for the lowest prices but with the most difficulties. The houses are usually not open for inspection and will have some big surprises in store for the buyer in terms of unexpected costs. This is best left to investors and contractors who know how to work these auctions.
Real Estate Owned by the Bank (REOs):
These sales usually occur after home have not sold at an auction and the bank has taken possession. Buyers can usually inspect these properties so that they know what they are getting into and the title will be clear. Banks may also good financing terms to the Buyer.
Apart from possible health and safety issues, the bank is unlikely to make any repairs and will sell the property as is. A thorough inspection is highly recommended in these kinds of sales. Also, don’t underestimate the repair costs. Better to over-estimate than have a nasty surprise.
If the property is priced well there will be multiple offers generated on it which may cause the successful Buyer to overpay. Buyers and their agents need to be careful not to fall into the trap. The agent should do their homework on comparable Los Angeles foreclosed homes, i.e. in the same area and keep the offer at or below those comps. Also, if successful, things will move quickly so be ready to move because the banks will be happy to charge a per diem fee for a late closing.
Also, if an area is saturated with foreclosed homes, that may not be the best investment if you are planning to move in a few years as prices could drop further and you may sell at a loss. Finding a home in a more stable community would be a safer bet.
As in any sale, but especially when buying a foreclosure, a Buyer’s financing should be in place. The bank is looking for a Buyer who is ready to go and able to close quickly.
Search Foreclosed Homes for Sale in Los Angeles
Mortgage Debt Forgiveness Will Not be Taxed in California
April 16, 2010 by Jane Peters · Leave a Comment
Governor Schwarzenegger has signed into law a “mortgage debt tax relief provision” which will shelter Californians who have lost their homes in this down market.
Part of bill SB 401, the provision will allow individuals to exclude up to $500,000 on the forgiven debt, or $250,000 for married individuals filing separately. This covers only principal residences from 2009 to 2012.
Homeowners would have had to pay taxes on the amount remaining on the loan as the result of a short sale or foreclosure. Debt-reducing loan modifications are also covered by this new law.
Second homes, income or business property, and cash-out equity refinance loans are excluded.
