Investors and buyers are attracted to distressed homes in Portland, OR because they are offered between 30% to 50% below market value and give them the opportunity to purchase homes in areas that they could not afford a few years ago. Short sales or pre-foreclosures are abundant as well. REO’s are popular among first time buyers too. Foreclosure auctions are held frequently in the Portland area so that investors and buyers can take advantage of these terrific bargains. Auctions are conducted online as well. You can check the local newspaper or the county courthouse to find out the sale date, time and place. Also, auction information may be posted online at various auction websites. If you have cash, you have the advantage to buy auction and short sale homes. Foreclosure sales can be complicated, so you should research the Oregon foreclosure laws before you buy a foreclosure home, especially at an auction. Purchasing a home at an auction has a bit more risk because you are obligated to pay off liens and evict the owner or any tenants living at the property.
Difference between Short sales vs. REO’s vs. Auction Properties
Short sales or pre-foreclosures, auction foreclosures and REO are referred to as distressed properties. Short sales have not been foreclosed yet, and the owner still is in possession of the property even though they are about to default or may have already defaulted on their mortgage. The owner needs their lender’s permission to sell the home because it is worth less than what the owner can sell it for as a result of declining home values. The owner has lost all or most of their equity, and now the lender is going to have to write off the difference between the sale proceeds and the loan balance because the owner is upside down on their mortgage. Lenders like cash buyers who make offers on short sale transactions because they know they will be able to close the transaction.
A home at a foreclosure auction has already gone through the foreclosure process. There are more risks associated with auction properties because the potential buyers may not have an opportunity to inspect property, the properties may have liens and the new buyer will have to pay off those liens. Buyers cannot obtain title insurance on properties bought at foreclosure auctions. Prices are generally substantially less than short sales and REO’s. Investors tend to buy auction properties for cash more than first time home buyers because they can afford to take the risks and feel the risks outweigh the benefit of getting a deeply discounted property. Also, homes usually need work and investors have access to contractors and sub-contractors that can do the work for them cheaply or many do the work themselves to save money if they are handy. It’s always best to stay away from any foreclosure properties that need structural repairs whether you are a seasoned investor or newbie because those repairs are often quite expensive and will cut into your profits.
A REO is a home that did not sell at a foreclosure auction that the bank buys back and resells. You can obtain title insurance and conduct an inspection. Properties are delivered vacant. There are no costs of eviction involved for the new buyer because the bank has already evicted the former owner or any tenants. The bank has also paid off any liens.
Whether you purchase a short sale, REO or auction property, it is essential that you conduct your due diligence and inspections, whenever possible to make sure you are aware of the property’s condition since all foreclosures are sold without any warranties in an “as is” condition. The condition of the property reflects the price so just because a property is offered for sale as a foreclosure, does not mean it’s a good deal unless you investigate other comparable properties in the area to see what they have been selling for. A local Realtor can give you that information. If it turns out the property is truly a bargain, then you know you are acquiring a property with a built in equity and making a wise investment.