The Basics Of Foreclosures


Three years ago the buzz words of real estate were "buy and flip." Today, we are down to one buzz word, "foreclosures."

You have probably heard or seen the ads touting the big opportunity in buying foreclosed properties. Without a doubt, the marketers of CDs, and manuals to teach "How to get Rich buying Foreclosed Properties!" are making a tidy profit. But is it as easy as the ads proclaim?

There are two types of foreclosures: Non-judicial and Judicial.


Non-judicial foreclosures are the same as a trustee's sale. In other words, the lending institution will auction off the property to the highest bidder. The lending institution has the right to bid up to the amount they are owed to ensure repayment of the debt. If there are no bidders or the bidders do not bid the minimum amount required by the lender, the property will "revert" or go back to the lender. The owner of the property has "the right of redemption" and may cancel the trustee's sale by paying the lender all payments that are in arrears, plus costs that the lender incurred by invoking a trustees sale. The account must be made whole by 5 p.m. the day prior to the auction.

Generally, the auction is held at the acting trustee's office.


A judicial foreclosure, sometimes called a "sheriff's sale," takes place on the courthouse steps in the county of the foreclosure. It is similar to a non-judicial foreclosure; however the owner of the property does not have the same "right of redemption" as in a trustee's sale. In order to redeem or get the property back, the owner must pay the lender the full amount owed on the property by 5 p.m. the day prior to the auction.

There are experts who purchase foreclosures and make a living doing so. In talking to a trustee who handles a lion's share of trustee sales in Phoenix, he said that 90 percent of his calls come from potential buyers asking how they finance the purchase of a foreclosure. The answer is you cannot finance a foreclosed property the way you would in a normal home purchase.

To bid on a foreclosure, you must have certified funds of $10,000 the day of the auction. If you are the successful bidder, you must pay off the balance, with "certified funds" by 5 p.m. of the next business day. In other words, you must have "cash in hand" to buy at a foreclosure proceeding.

Next week -- The pros and cons of buying foreclosures.

Ray Pugel is the designated broker for Coldwell Banker Bishop Realty. For more information, call (928) 474-2216.

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