There are approximately 789 pre-foreclosure notices that have been filed, 1,114 foreclosed homes and 117 bank owned REO’s available in the Charleston, SC area according to RealtyTrac, Investors have a variety of opportunities to purchase Charleston real estate at deep discounts at either foreclosure auctions, from banks that own foreclosed homes (REO’s) or from sellers who are upside down on their mortgages and must sell their homes as a short sale pre-foreclosure. Because home values have declined the past few years, home prices are extremely affordable and there is a large selection of foreclosure homes to choose from in pretty much all areas and price ranges.
The difference between an auction property, a REO and a short sale is that a home offered at auction has already been through a formal foreclosure process instituted by the lender. Any homes that do not sell at foreclosure auctions are then bought back by the lender who foreclosed and become REO’s. REO’s are then offered for resale through local Realtors who represent the banks that own them. So when you make an offer, the seller is the bank instead of a private party. A short sale is a pre-foreclosure home that has not gone through the foreclosure process yet. The owner may have already defaulted on their mortgage or may be heading towards default because they have a financial hardship, they are upside down on their mortgage and owe more to the lender than they can sell the home for in today’s market. The lender must approve the transaction though because they are going to have to write off the difference between the sale proceeds and the loan balance. Short sales are preferred by homeowners because they avoid having a foreclosure on their credit and save them money by not having to defend themselves against a foreclosure action. If negotiated properly, the seller walks away owing their lender nothing.
With an auction property, you are buying the property at a deep discounted price. The bank wants to get it off their books because they are not in the real estate management business and have too many foreclosure properties in their inventory right now with more coming. So it is in the bank’s interest to get rid of as many of their foreclosure homes as they can so they can get back into the business of making loans and making money on those loans. Banks have to answer to their shareholders and shareholders are interested in the bank making profits so that they get the benefits of owning shares in a company that is showing a profit.
If you have never purchased a home at a Charleston foreclosure auction, you should know that you are responsible as the new buyer for paying off liens on the home or evicting former owners or tenants. This is why you must conduct your due diligence first before bidding on an auction home or buying a REO property so you know all the costs of purchasing the property and whether or not it is a good investment and whether your will yield a high rate of return on your money.
All properties are sold in an as is condition meaning that the buyer is responsible for all the repairs that the home might need. If the home needs new major systems, this could be expensive. You need cash to purchase a foreclosure auction home. For those investors that are new to real estate investing, you might want to purchase a REO property which has less risk. The bank has already paid off the liens when you buy a REO, you can inspect the home and you can obtain financing. REO’s also offer investors the opportunity to buy the home at or below market value.
A local realtor can give you a free market analysis to find out what the homes are selling for in the neighborhood. This way you know how much to offer the bank so that you are not over paying for the home. There is a lot of completion for foreclosed homes in the Charleston area so be prepared to bid against other buyers both at auctions and when making offers on REO’s.
Short sales give you a chance to purchase the home before it goes to foreclosure. However, there is no guarantee that the seller’s bank will approve the short sale. Short sales take longer to close because the bank wants to review the seller’s financials to make sure they are experiencing a hardship and are not hiding other assets that could be used to pay off their mortgage. The bank also obtains a broker price opinion from an area Realtor so they know the value of the home. They may also hire a certified appraiser to appraise it to make sure they are getting the most for the home because they have to write off the difference between the sale proceeds and what the seller owes them on their mortgage. If the bank determines that they will get more money if they foreclose, they may not agree to approve the short sale. Short sale properties may be in better condition than REO’s and auction properties though since the owner or their tenant may be residing at the property and taking care of it.
Whether you decide to purchase a Charleston foreclosure home at an auction, from the bank or from a short sale seller, there are many choices of homes to choose from in the Charleston and surrounding areas. Now is a great time to invest in affordable Charleston foreclosure homes.