Strategies to Buying a Home in Foreclosure Here in Santa Barbara CA.
If you are hoping to purchase a house on the cheap by buying a foreclosed property here in the Santa Barbara area, you are not alone? It is a natural instinct to want to look into this as an option as the market has slowed and the constant bombardment of negative media news regarding real estate
continues. There are some good deals out there here locally, but the process can be complicated and risky and you need to be educated on what you are getting into.
Here are a 2 Quick Points you need to know firsthand with regards to foreclosures here in the Santa Barbara area.
1) There simply are not as many here locally in Santa Barbara as perceived, based on the national news. Also, Santa Barbara often gets bundled into statistics that include Lompoc and Santa Maria (Santa Barbara County) where there are much more foreclosures to be had.
2) Most of the foreclosures here in Santa Barbara tend to be in the condo market roughly in the $250,000 to $700,000 price point, or in track homes around the $500,000 to $800,000 price point. Additionally, most of the foreclosures here locally are in Goleta and Carpinteria as of now. There certainly are others, they are just fewer and farther between. Stages of Foreclosures:
There are three different stages of foreclosure for real estate, each of these presenting different opportunities for you to buy.
1) Pre-foreclosure When a borrower has unfortunately fallen behind on their monthly mortgage payments, the home will go into pre-foreclosure. Active buyers can find pre-foreclosures by spending lots of time diving into the delinquency notices that lenders file with the county courthouse here in Santa Barbara when a borrower has missed their payments. Now with potential prospects in hand, you can go drive-by these homes on your own. If you see a home that you potentially would like to pursue, you could contact the owner directly to see if they want to sell. NOTE: You will read articles here and there that this is a good way to make a profit of sometimes 30% from such places as foreclosure.com etc. Simple fact is...from what I have learned, this reality will be difficult with the current "owners" being in a very emotional state and often angry. Most likely these people will be trying to hold onto their homes and would look harshly at anyone they consider might be "sniffing around". Granted there will be some who want relief from bad mortgages, but it can be a fine line and a way to put yourself in some stressful and potentially scary situations. Many of these homeowners in this situation will also opt to try a short sale which at a minimum buys them time...often many months. More and more banks are seeming reluctant to many short sales with some stats showing only 15-20% of short sales ever closing.
2) Sheriffs' sales After a home reaches default, one option is to try and auction the home off on the county courthouse steps here in town. These homes can offer some real bargains, but the process takes a serious affinity to risk. If you are bidding on a property, you can not inspect the property beforehand and therefore there is no telling how much work it needs. You also do not know what kind of liens there are against the home, if any, due to unpaid taxes, a contractor's lien etc. All of this makes it very difficult to establish value. Lastly, you as the buyer need to have ready cash, sometimes 10%-20% down on the spot, and be able to come up with the rest in a matter of days. For me, I would rather simply wait until a bank owned property is officially listed and work with a seasoned Realtor who knows the value of homes. Additionally, you will be able to inspect the property which is as important as anything.
3) Post-foreclosure Once a lender finally takes back a house, the property will go on the market as quickly as possible and be listed as an REO (real estate owned) or Bank Owned property at a very good market value or below market value. These homes then in effect become ordinary sales, listed with a broker. Here in Santa Barbara, homes that are in foreclosure that are perceived as bargains are often getting multiple bids. If a home has been on the market for longer than a week, you as a buyer can offer a much lower price and negotiate. Generally the lender has a lowest dollar amount they will accept. If you are willing to meet this price, the home is yours. If not, then the home will stay on the market to hopefully attract other buyers.