What is a Foreclosure?

We have created this website to provide a single source for finding all of the foreclosures available in the Lake Tulloch/Copperopolis area. Besides providing the listings, it is our intention to educate our clients about the important details and issues that may or may not affect the purchase of a foreclosed home. While the prices of foreclosures are enticing, we want you to know what to expect in the process of purchasing a foreclosed home.

As you may know there have been many factors that have led to the current downturn of the economy. Many of the first foreclosures that were seen in the initial wave were from speculator buyers that go caught up in the "flipping" craze. As the market was skyrocketing, these investors would buy homes only to immediately put the homes back on the market at a higher price. Eventually the skyrocketting housing market started its downturn and these investors in most cases just walked away from the homes owing much more than they were worth. Many of the current foreclosures seem to stem from problems in the subprime mortgage market. Many people are losing their homes after being hit with a huge jump in monthly payments once initial low interest rates adjusted up, sometimes to double digits. 

Many of these foreclosures are new homeowners who had built little or no equity in their property; therefore, the amount the lender is trying to recover may be a lot more than the home is actually worth. 

If you're a homeowner in trouble, this article isn't for you. We would recommend that you contact your lender or one of the many sources available to help with loan modification. Do your research because there have been many cases of fraudulent sources that can promise you a solution for an upfront fee, and then end up disappearing with your money. We have nothing but sympathy for homeowners in trouble and nothing we say is intended to victimize them or worsen their situation.

However, let's be realistic. In any kind of market, there are buyers and sellers. If you've been priced out of homeownership the last several years, this may be your chance to get a home of your own. You shouldn't feel guilty about buying a home that's been foreclosed -- you didn't make it happen and if you don't buy the home, someone else will.

Having said that, let's get back to basics of buying a foreclosed home.

Land Mines

You have to do a title search or you could end up thinking you've just bought a home by paying off a $100,000 mortgage only to find out that was just the second mortgage and you have to pay another $200,000 to take ownership. 

Suddenly that great buy isn't such a good deal. You also have to be aware of any liens on the property because you're going to be responsible for those as well. 

On top of that, foreclosure homes are sold "as is" which means that the money that you just saved on the purchase price can easily be eaten up by unforeseen expenses such as repairs not immediately apparent in an exterior inspection. That's because when you buy a home in foreclosure, you may not be able to look inside let alone have an inspector detect structural problems that you'll need to fix before moving in. 

Something else to think about -- people who lost their home in foreclosure very likely couldn't afford to maintain their property. 

So be prepared to pay for any problems such as electrical or plumbing repairs, leaky roofs, or even vandalism by angry homeowners who break things or punch holes in walls and doors, an unacceptable but not that uncommon way that some homeowners deal with the angst of losing their home to foreclosure. 

Just remember that they're losing a home and you're benefiting from their loss so they may want to take out some of that rage on the new buyer the only way they can, by trashing the home that they've lost. 

Three Ways to Buy

There are three ways you can buy foreclosures and each one has its own distinct discipline. 

They are:

• Pre-foreclosures, where you buy directly from a homeowner before the bank forecloses;
•At auction, where you place a bid, possibly in competition with others;
•From a real estate company. This is called an REO. 

Pre-foreclosures Pre-foreclosures used to be appealing because they require the least amount of capital, and almost all the information you need is available. 

You can inspect the house and conduct a title search so you won't have any surprises. With a pre-foreclosure, the owner signs a deed and gives you the property. 

In return, you acquire the mortgage that comes with it if the loan is assumable or you must secure a loan to pay off the current loan . If you assume a loan, you will also have to make the mortgage current by giving the bank any back payments. 

In today's, housing market, the pre-foreclosure method is not that realisitic because most of the current foreclosures only exist because the owner owed more on the loan than the home was worth. You do not want to overpay and it is always best to obtain a price opinion from a licensed Realtor® to make sure that you are getting the "deal" that you were expecting.

At Auction The exact mechanism varies from one state to another, but in Calaveras County auctions are held on the courthouse steps.

Auctions also carry the most risk and even if you were fortunate enough to find a wonderful deal, you have to be very careful.

In an auction, buyers can't inspect the home in advance of the auction, they have to pay in cash, usually with a cashier's check, and sometimes the current homeowner simply refuses to move out. It then becomes the buyer's responsibility to evict the old owner. 

Auctions that appear to have equity for the taking, also tend to attract real estate investors seeking a great bargain that they intend to flip (resell) for a quick profit.

Finding a home at auctions in today's housing climate, is very unlikely, because most of the time the foreclosure amount is significantly more than the home is currently worth.

If you're looking for a home to live in, an auction is probably not the way to go.

REO   Real Estate Owned properties(REOs), or bank owned properties represent the third way to buy foreclosures. 

REO homes are the least risky in terms of what you're buying. You can fully inspect the property, demand a clear title, and the sale can be subject to getting a mortgage.

Most banks sell foreclosure properties through a broker. They are considered the safest and also the most common of all foreclosure buying options. Properties sold this way also tend to be in better shape. 

The downside is that sometimes these homes are "stripped" of items such as HVAC units, kitchen appliances, light fixtures, cabinets, sinks, doors, you name it!

REO sellers are also exempt from providing a buyer with a Transfer Disclosure Statement. A "TDS" as it is most commonly refered to, is a disclosure where a seller tells you about any defects in the home or property. Since the banks do not have any experience with the home, they are unable to realistically  disclose defects, because in most cases, they wouldhave no way of knowing.

The best way to protect your home purchase or investment, is to hire professional inspectors the cover some, all or more of the following inspections, such as termite, home, roof, geological, county(non-finaled properties), well, septic, spa, swimming pool, HVAC, property pin survey, etc.

Financial Considerations

When considering buying a home that's gone into foreclosure there are a number of financial considerations that have nothing to do with the property but which could put you between a rock and a hard place. 

For example, when you go to an auction, you may need a letter from either a bank or lender that you have the money to buy the property. 

On the other hand, many banks and lenders will refuse to even give you a mortgage on a property being sold "as is" because that means their appraiser can't inspect it first. 

Meanwhile, some states have redemption periods whereby the original homeowner can buy back the property by paying whatever money he or she still owed.

If the amount owed is less than what the buyer paid, and if the buyer bought the property by bidding on it at auction, and he probably did, then the buyer loses that money. He also loses any money spent on repairs or upgrades. 

But you may be able to have this redemption right waived, so make sure you check into the situation in the state where you are purchasing the foreclosure. 

Another possible complication is something mentioned earlier, a "lien." A lien is a legal claim against a home. 

There's a fairly good possibility that someone who can't make mortgage payments may owe money elsewhere. Therefore, you have to conduct what's called a "title search" that should uncover any liens. 

Common liens stem from unpaid taxes -- either property taxes or income taxes -- in which case the federal, state or local government could have a claim against the foreclosed property. 

Other liens include unpaid contractors or loans borrowed against the property. 

These liens remain intact until the money is paid which means that you will have to pay off the liens on the foreclosed property you are buying, even though it wasn't your water heater the plumber repaired, and even though you're not the one who didn't pay the property taxes the last few years. 

Be forewarned -- you won't be able to get title insurance that provides protection against anyone challenging you for ownership of the property. 

Still interested? 

If so, here are some tips to help you to safeguard against foreclosure headaches that may come with the territory. 

If possible, only consider REO homes as you can inspect them for any potential issues and you can obtain title insurance to make sure that you are not paying for the leins or debts of the previous owner. 

All of the agents at California Properties are well versed in representing and protecting buyers in the purchase of an REO property. All of our seasoned agents live locally and are aware of the common and not so common issues that can be experienced in the purchase of an REO property. We are here to protect you and to help find you the best deal in today's market.

Foreclosure laws vary by state so check ours by going to www.realtytrac.com or contact the county clerk's office.