2017 Foreclosure Guide

Foreclosures were all the buzz in the post 2007 real estate crash. Opportunities were prime pickings with high inventory levels, cheap prices, and with buyers having the negotiating leverage.

In the 2017 Foreclosure Search Guide, we'll venture into what are foreclosures, how properties become a foreclosure, who are the main foreclosure sellers, what the inventory levels are, and how to search for foreclosures in your area.

Let's begin.

What are Foreclosure Properties?

Foreclosures, or foreclosed properties, are properties that have been through the foreclosure process and now are owned by an entity, or bank.

  • Foreclosure: A proceeding in or out of court, to extinguish all rights, title, and interest, of the owner(s) of property in order to sell the property to satisfy a lien against it.

Other common names for foreclosures are "bank owned", "bank owned properties", "REO", "REOs", and "real estate owned".

How do Properties become Foreclosures?

When a homeowner receives a loan to purchase property that loan is owned and serviced by a bank or institution, called a lienholder. If the homeowner stops making their mortgage payments, for any reason, the lienholder can start the foreclosure process to either 1. get the homeowner to become current, or 2. foreclose on the property and take over ownership.

What Types of Foreclosures Are There?

  • Judicial Foreclosure: Foreclosure through court action rather than by a power of sale. Judicial foreclosure is sometimes necessary to remove certain tax liens.
  • NonJudicial Foreclosure: Sale by a trustee under a deed of trust, or mortgagee under a power of sale of a mortgage. There is no court (judicial) proceeding.

More definitions found here.

Who are the Foreclosed Properties Sellers?

Though this is not a complete list, the list represents some of the most common sellers.

  • HUD
  • Fannie Mae
  • Freddie Mac
  • Homeowner Association
  • Nationstar
  • HomePath
  • BECU
  • Ocwen

These sellers usually have their own agent representation to manage the sale of the property. As such, buyers receive no benefit in purchasing a foreclosure by working directly with the listing agent.

MYTH: When buyers work directly with the foreclosed property's listing agent, the buyer will save money and improve their negotiations since there is only one commission.

FACT: Commissions are detailed in an upfront listing agreement and the listing agent agrees to share a portion of that commission with the cooperating agent (selling agent). If there is only the listing agent on the contract representing the seller and doing paperwork for the buyer then the listing agent receives both commissions - listing and selling sides. In addition. the buyer never receives their own representation and doesn't save any money because the listing agent represents the seller, not the buyer.

What is the Foreclosure Market Doing?

Below is a chart depicting 2009's monthly supply of foreclosed inventory and it's hard to miss how prominent the foreclosure market was in Snohomish County.

2009 Foreclosure Inventory Data

Deals, deals and more deals were national headlines and real estate sales ads. With that being said, is that case with foreclosures in 2017?

Not necessarily.

Foreclosures don't follow the normal ebb-and flow of real estate. In the below 3 year chart, foreclosures can be seen rising and falling at different rates and times.

2016 Foreclosure Data

However, if some trend can be seen then then there could be an increase in foreclosure inventory sometime around Summer.

How Do I find Foreclosures in Snohomish County?

This website has a dedicated foreclosure search page and each city's web page has its quick link. Here are the quick links for active foreclosure properties throughout Snohomish County.

Want to learn how to customize searches? Then read the post 10 Ways to Improve Your Online Home Search for tips on saving, editing, and creating multiple property searches so you always get information first.

What Can I Expect when Buying a Foreclosure?

The inventory in 2009 was much different than its modern counterpart yet some relics remain. Back then, condition were atrocious and not safe in many and through the fallout bank owned sellers learned a few things.

Condition: Ranges from new carpet and paint with safety items being fixed to the trashed and uninhabitable, Ocwen usually sells those homes.

Price: Price is dictated by market values, condition, size and location. Fixers tend to be good and attractive for investors.

Styles: Single family homes, multi-family homes, condos and townhomes, manufactured homes, and even vacant homes. They can have small lots, acreage, pools, and so-on though have yet to see one with solar.

Writing an Offer: HUD uses a 100% online system for their initial offer, Fannie Mae uses one part documents and one part online, other sellers use traditional agent based models while some use auction websites like Xome.com.

Purchase & Sale Agreements: Typically, sellers have their own 'bank owned addendum' to sign along with State approved purchase and sale form provided by NWMLS member brokers. HUD for example, exclusively uses their own contract.

Home Inspections: Typically, bank owned sellers allow home inspection contingencies within the buyer's offer. Some don't and being that Washington State is buyer beware state, it's recommend to always have a home inspection when buying a foreclosure.

Closing Costs: In a buyer's financing addendum, buyers have the option to ask for seller to contribute towards their closing costs. Most allow it right up front yet a few just respond with blatant 'no'. However, if inventory dramatically climbs then sellers are more apt to agree to them.

Closing & Keys: Upon County recording, buyers can get their keys. It is HIGHLY recommended to change the locks or have the locks re-keyed by a local locksmith.

Anything We Can Add or Questions to Answer?

Looking for something that could be added or another question answered? We'd love to hear in the comments and incorporate into the post. In the mean time, happy housing hunting and stay sharp!