If you have never ‘dabbled’ in real estate investing or California foreclosure auctions, but are considering it, you need to realize that it can sometimes be difficult. However, once you have made your first purchase and made a profit, you will find it gets easier and better.
Although the profits from a California foreclosure auction which you acquire property from can be huge, this is not a good investment choice for a beginner. However, it can be done and done right! Just remember that there is much to know in order to avoid any pitfalls that might occur.
Typically, there are three ways to buy a foreclosed property and these depend on the stage of the foreclosure process. These are: pre-foreclosures, auctions, and buying from a lender after the sale.
If you are able to purchase a property from an owner before it goes into foreclosure, while still at the delinquent stage, you can probably get a pretty good deal. This is a pre-foreclosure. A California foreclosure auction pretty much defines itself. The foreclosed property goes up for auction and the highest bidder wins or if no one bids—the lender gets the property.
When you buy after the lender has gained possession, it is called an REO or real estate owned property; better known as a repo or repossession. Typically, a lender will list the property as ‘lender owned’. This is the least risky way to buy any foreclosure property. Buying from a lender in California usually offers some form of legal recourse should the property have more problems than were foreseen.
Buying from property owners who are about to lose their property can be risky since they can easily ‘forget’ about liens on the property or taxes owed on the property, etc. This can get pretty tough. However, some states do offer special laws regarding this type of property sale.
Buying at a California foreclosure auction carries the worst risk. With no agent, you are on your own. There is no escrow, no title report, and no title insurance. These are typically all cash sales (you have a week to a month to come up with the total purchase price—if you do not—you lose your deposit). You get no warranty, no assurance of the property having no liens or loans against it, no inspections, no disclosure from previous owner as to its’ true condition, etc. If it is rental property, you are responsible for evicting tenants.
California foreclosure auctions can provide you with a means to a very profitable end, but do not go into this type of investment blind. Arm yourself with knowledge and a good attorney, just in case.
