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Simple question...

Can I purchase a foreclosed home at auction without 100% cash?

BayArea says

Simple question...

Can I purchase a foreclosed home at auction without 100% cash?

Simple answer. YES!!!

Fortwayne,

Thanks for the tips. :0)

E-man says

Simple answer. YES!!!

Wonderful, would you elaborate?

How much DP is typically needed at these auctions and are banks willing to work with buyers on this?

There are no banks involved. you will have to get private loans as far as I have read. from a hard money lender. I think rates are like 8-12% and they want probably 30% dp. Everyone varies of course.

(funny thing about these private loans, the dp and the interest rates are 'totally completely non subsidized by the taxpayers' so they tell us where mortgage int rate/down payment SHOULD BE without the endless money funnel RE gets from the feds)

Theres only one i can think of off hand the norris group. google him.

auction buying is not for noobs. buy a 2nd lein by mistake and lose all your money. what about past due taxes and mechanics liens? u better add that up.

BayArea says

Simple question...

Can I purchase a foreclosed home at auction without 100% cash?

Typically you cannot get a loan, but I've heard that you can get FHA loans on Fannie/Freddie foreclosures. But I really never seen that, so not sure if that is even true.

What I do know is you need a full amount at the courthouse steps. You can borrow money from a hard cash lender, but they charge like ptiemann said around 12% interest, so you have to make sure you can refinance which is hard if you are borrowing and might not have enough equity for bank to refi you.

Ptiemann actually covered it well right above.

ptiemann says

FortWayne says

If I remember it right, in CA foreclosures all leans get wiped out except for unpaid state and federal taxes.

it's 'liens', and that statement is BS.

Even water company liens can be enforced, don't ask me how I know.

Got a question for you there ptiemann.

You said earlier that you had a story about some Vietnamese man showing up at the courthouse steps with a lien on some money borrowed. That sounds like a kind of lien that would get wiped out at foreclosure auction in CA. Primary is still the main mortgage. Or am I missing something, giving out somewhat incorrect advice?

At foreclosure auctions, does the bank have the wet ink mortgage & wet ink promissory note in their possession? If not, could this a problem ? HMMM?

Buying a REO & receiving title insurance does the title company verify that all recorded documents are legal? HMMM?

Peter,

I saw that a couple of times & passed. However, there was one time that the "supposed" 1st lender forecloses, but it was recorded after the 2nd so I passed too. It looks like the guy got it for a good price. I was seriously thinking about buying it though. In hindsight, I should have gone for it based on what King Side said.

Starting bid was $117,500, and the guy got it for a penny over. There was a $70k on the second. FMV was $175k-$180k. Typically, the regulars would bid this property up to between $133k to $139k.

I saw Akimax paid $164,200 for a property in April. Now it's on the market for $220k. We bought an identical unit in the complex through short sale for $155k in May. We're still happy about that. :0)

ptiemann says

The private/ hard money is not helpful to buy a property at auction unless you already own other real estate to borrow against. Nobody will give you a loan secured by the property that you will be bidding on. You need to borrow against your existing RE portfolio.

ptiemann says

100%. You need to bring cashier's checks with you.

PockyClipsNow says

you will have to get private loans as far as I have read. from a hard money lender. I think rates are like 8-12% and they want probably 30% dp. Everyone varies of course.

Thanks guys, the above is what I was looking for.

Back to MLS for me :-/

robertoaribas says

Ptieman:

Order that the lien is recorded is all that matters. .

Not necessarily. It really depends upon the laws of the particular state and whether they can be categorized generally as (a) Race (as in race to record), (b) Notice (as in actual or constructive notice) or (c) Race/Notice.

Take Ptieman's case of the Vietnamese bank (VB). He was correct in that it would have made a difference if VB had a representative show up at the courthouse steps. In a Notice or a Race Notice state, this would likely constitute actual or constructive knowledge such that the winning bidder could not be a bona-fide purchaser (legally important concept of a BFP). As such, the VB would have a claim that would survive the foreclosure auction despite the fact they had not recorded their lien.

Also, while there are a few states that are Race only, the vast majority of states can be classified as either Notice or Race/Notice. Therefore, it is incorrect to say that recordation is the end all be all as to what liens will/will not survive a foreclosure sale.

robertoaribas says

Question is about California, which like Arizona, is an order or recording state. For reference: http://www.brewerfirm.com/articles/article-whosonfirst.html

Order of recording alone will not cut it as California is a Race Notice state. Your reference is about mechanics liens which (like some tax liens, certain attorneys fees, DIP financing, etc) do get superpriority. Yet thats not the issue here as we are talking about a simple second that went unrecorded.

Even in that example, and even if this happened in a Notice state, the VB would have to be able to PROVE that it gave constructive notice to the buyer of prior lien status, merely standing around at the auction wouldn't suffice by any means at all.

FYI, I gave you the very condensed version of what constitutes notice when determining a BFP. A more nuanced version of what constitutes notice would include all 4 types of imputed notice, particularly inquiry. And yes "merely standing around" can be enough to necessitate inquiry, depending upon the specifics of the facts in the particular case.

Bottom line, dont get me wrong here. Your advice is generally sound and better informed than most of what I see on this site. And yes, in the vast majority of cases, recordation is all you need to worry about, and I would bet every single person here could engage in a lifetime of buying foreclosures without having to worry about anything more than what they see on their lien search, and perhaps, their schedule B exceptions to title in their policy.

Still, when someone speaks in absolutes (i.e "The order of a loan is based on when it is recorded. ALWAYS! PERIOD!") its helpful to point out when that is factually incorrect.

robertoaribas says

CDon says

Order of recording alone will not cut it as California is a Race Notice state.

sir, you are incorrect.

You might actually try reading the California Civil Code, article 4, priority of liens... sections 2897 to 2899

Statutory construction of 2897 is the start point. The end point is how that statutory language is interpreted in CA courts. CA courts have come down on the side of race-notice

http://www.mellorlawfirm.com/legal-news/two-deeds-of-trust-neither-was-recorded-first-a-primer-in-the-law-of-priorities-or-californias-race-notice-statutes/

If you have acess to Lexis or Westlaw, Miller & Starr is a fairly good treatise. For as active as you seem in purchasing foreclosures, I would highly encourage you to educate yourself especially as Arizona is a pure "notice" state.