Foreclosure before trustee sale

[Donna Drake]

Hi everyone! I am new to BigPockets and found this forum while searching for answers to questions I have about purchasing a property I found.

My current house is on the market. While walking the streets, "not street walking," of the small town I want to move to, I came upon a empty house I want to buy.

After speaking to the neighbor, she informed me that the owner died in April 2009. After doing research, I spoke with the family's lawyer and he told me they were letting the house go, that it wasn't worth what was owed on it.

There have been no payments made since April 2009 and no taxes paid.

My Question is, when my house sells is there a way to purchase this house directly from the bank? My Realtor told me that we couldn't do that and we would have to wait till the house comes on the market. I'm not one to wait if I don't have to, and I have to wonder if there isn't some way this can be done.

The house has been sitting empty for over a year! I don't understand why it is not on the market yet. I am in Arizona.

I may have an offer coming in this week for my current house. The goal is to move to the house I found. Not rent till it comes on the market.

HELP! Any knowledge on how to do this will be very much appreciated!

[Jon Holdman]

First, I'll give my standard advice to folks in your situation. Buying a property involved in a foreclosure is an exercise in frustration and disappointment. Whether its a short sale, at the auction or bank owned (REO), the odds of you being able to buy any particular property are very slim. When I'm trying to buy, I typically consider over 100 houses (i.e., look at listings and do the basic research), actually look inside 50-60, make 15-20 offers and buy one house. I've learned to NEVER get tied to any specific house, since the chances of buying that house are very slim.

If you REALLY want this house, find out how much is owed to the bank and pay enough so the bank can be paid in full. If you do that, you can buy it right now. That may be way too much to pay, and a lender may be unwilling to use that as the value, but that's a sure way to actually get that house.

You could try to do a short sale. That would meaning getting cooperation from the current owner. That may be difficult if the heirs are not interested in working something out. But if the lawyer will cooperate, you might be able to do that.

The next opportunity would be at the auction. The lender may make this happen anyway, if they think they can get more at the auction. Not sure about AZ auctions (I think some others here are), but in CO, its cash on the barrelhead at the auction. Its a good way to buy if you have cash and understand what you're getting, but if you intend to finance the house, this won't work.

If the bank prices it near market value, they may well get a buyer at the auction. If that happens, you might be able to buy it from the buyer. Most auction buyers are investors, so there's a chance they would be willing to sell. You would want to be at the auction, then approach the buyer and see if they will sell.

If the bank takes it back, you will likely have to wait for the bank to get it listed on the MLS. This process typically takes many months. You might be able to contact the bank and at least find out who they will list it with, then contact that person and let them know your are interested. If its a smaller bank, you might actually be able to buy it directly. Most likely, though, its with one of the big banks (I say that simply because the big guys hold most of the mortgages that exist.) They have a process and its hard to short cut the process.

Once its listed on the MLS, you would make your offer and buy it just like any other property. Realize, though, that sales of REOs are pretty brisk in many areas. If they bring it on the market at a low price there may be a lot of offers. This is quite common in our area.

So, I'll again emphasize that if you want to avoid heartbreak, forget about this specific house. Find 10 or 20 more that you like and go after all of them. That should make it possible to buy one of them. If you're really determined to buy THIS specific house, find out what it will take and pay the price.