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The Secret Seedy Underbelly of Sacramento Foreclosures
Contrary to popular belief, sweeping California legislation that changed many of the laws about foreclosures and short sales a few years ago does not contain protection provisions that some people expect, probably due to political compromises. For example, did you know that a homeowner who is in default (behind on mortgage payments) and in escrow pursuing a short sale can be foreclosed upon by the bank? But if a homeowner is chasing down a loan modification, the bank is not allowed to continue with foreclosure proceedings.
A provision kicks in to protect short sale sellers against foreclosure but not until 2018. Today, the basic way to stop a foreclosure during a short sale is to receive the approval letter. Although most banks are certainly free to postpone the trustee auction, there are rules and restrictions, and having an offer on the table is no guarantee of a postponement.
I’m seeing new seediness creep into the foreclosure market, stuff that I haven’t seen for about 10 years is now popping up, and it’s across the board. Bank of America has mostly shutdown its short sale operations and sold off its bad debt. It’s rare to work on a Bank of America short sale these days. If it starts out as a Bank of America short sale, typically it doesn’t end that way as the bank scurries to drop at least the servicing of its underwater loans, if not to sell the mortgage outright.
FHA short sales fall under HUD (Housing and Urban Development), and I’ve recently watched HUD sell the loan to a third-party investment company that handles conventional financing, right in the middle of the short sale, and after it issued the Approval to Participate. I guess it forgot the Approval to Puke-atate. The investment company sent a so-called appraiser to the seller’s home to determine whether it would make more money to evict the seller through a foreclosure action. The guy was part of an investment group that buys homes in bulk through lenders and on the courthouse steps as Sacramento foreclosures.
It should be criminal that banks can own mortgage insurance companies that slap on its policies to insure worthless paper on underwater homes. Doesn’t that boggle your mind? There is a market for bad paper, and the banks profit from it, even after the mortgage insurer rejects the short sale and opts for foreclosure, stripping a homeowner of the option to short sale and without the owner’s permission to allow mortgage insurance. In some instances, owners were guaranteed upfront that an 80 / 20 combo loan meant no mortgage insurance, and once hard times hit, the bank attaches its own MI policy. What? How is that not fraudulent? Why doesn’t Kamala Harris investigate this sort of scam?
Even our own quasi-government entity Fannie Mae is not immune. It routinely pads the appraisals to demand more money than a Fannie Mae short sale would provide — since a short sale generally involves buyer financing and buyer financing is based on a valid appraisal. Foreclosures are profitable for Fannie Mae and for institutional banks as well. They get paid to do foreclosures and there are sometimes so many monetary incentives for a foreclosure that it’s the more attractive alternative.
You may hear a lot of lip service about loan modifications and short sales, but bottom line, even our own government is telling us there are more financial rewards in foreclosures. That’s like telling an expectant mother she can’t use a public restroom and needs to go crap in a ditch.
Where to Find Good Deals on Foreclosures in Sacramento
Just what is the deal with all of those Sacramento foreclosure listings potential buyers find online and get all excited about? Man, you’ve got your auction houses, trustee sales, preforeclosures, short sales, bank-owned homes, HUD homes, the list goes on, and it’s enough to make a poor buyer’s head spin. Let’s not even talk about Property Radar because that’s way too confusing for even licensed real estate agents to navigate much less a poor first-time home buyer, but talk about it I suppose we must.
For starters, you can pretty much discount at least 90% of the stuff you find posted online, unless it is posted on a reputable website in which all of the information on that website is screened for accuracy such as MetroList — but even the public can’t access all of the up-to-minute information available from MetroList like a real estate agent can. We pay big bucks for dues to these businesses for a reason. They have a monopoly.
The preforeclosures that look like listings are typically not for sale. Some buyers spot preforeclosure homes on a website like Zillow, which buys a feed from third-party vendors that downloads listings of homeowners in default. It generally means a homeowner is behind in making payments. A preforeclosure does not mean the home is for sale or will ever be for sale, nor does it mean anybody has the right to start poking around the property, looking in the windows, unless they want to get shot for trespassing.
A short sale listing could be for sale or it could be a contingent short sale or a pending short lender approval status, in the latter cases it means somebody else beat ya to the punch and has already written an offer that the seller accepted. Some short sale status information, especially those advertised in MetroList, are very confusing and laypeople can’t figure out whether they are for sale or not.
If you plan to bid on a trustee’s sale, you’ve got to figure out if the minimum bid is reasonable or the opening bid is unreasonable. If it is unreasonably high, it means the bank doesn’t want anybody to bid on it and prefers to take the home in foreclosure because the bank might make more money to foreclose than to sell at market. If it is reasonable, then you better be prepared to bid with the courthouse steps’ sharks, those guys chewing toothpicks and sticking unlit cigarettes behind their ears. They know what they’re doing; you don’t. Plus, you’ll needs lots of cash. No financing.
There are always auction websites such as auction.com where you can go to buy auction homes online, finance those homes, and you can name an agent to represent you. Be careful of shill bids and reserve pricing, figure out incrementals, and know whether you’re bidding on a short sale, foreclosures in Sacramento or a flipper.
If you like, you can look at those overpriced homes HUD lists online at Homepath, where there is no appraisal because the home probably won’t appraise at that price. The government doesn’t care if you’re upside-down the day you buy.
Or you can just cut to the chase and talk to your Sacramento real estate agent and ask a professional to find you a good deal. But bear in mind we have very little inventory and stiff competition for the well priced stuff. Maybe your best bet is just to try to buy a home? Not everybody needs to get a smokin’ deal to do well. Those searching for smokin’ deals often end up with nothing but black hands and shredded beliefs based on getting something for free.
Can You Buy a Preforeclosure Home in Sacramento?
Lots of preforeclosure buyers contact this Sacramento real estate agent because I post my goofy-ass face on other real estate websites and often participate in online discussions about homebuying in my spare time. My husband doesn’t understand why I do it. He thinks I should do something else with my free time like going out to dinner or hiking in the foothills or searching the Internet for great airfares to Iceland. But then he didn’t understand why I agreed to be on a House Hunters show about short sales, either.
Most normal people, when they are away from work, focus on other things, stuff that is more fun to them. They lead what is known in some circles as a balanced life. Then there are those of us that belong to that special breed of craziness, those of us who are actually doing a job we completely love to the point that it’s totally fun and not work. We are passionate about our work. If that work also involves short sales, foreclosures and preforeclosures, it’s just that much more interesting.
Any person with reasonable intelligence (and some with less than that) can be successful in real estate and sell a home. Some of us go a step or two beyond because that’s what buyers want from us. They want us to possess the skills to buy a foreclosure, buy a short sale or buy that terrific preforeclosure home they saw advertised on another website for some ridiculously low price.
The problem with that is the pre-foreclosures are not for sale. These are homes made public because the sellers are in default. It’s not that easy to buy a preforeclosure but it can be done under certain circumstances. It’s recognizing those certain circumstances that make the difference.
For most Sacramento home buyers, though, buying a preforeclosure will never happen. That’s because they don’t really want a pre-foreclosure, they just think they do. What they want, what they really, really want is a good deal. That’s not necessarily a preforeclosure.
