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Dynamax Realty - Syracuse: Resources - Real Estate FAQ

Resource Guide and News

Resource Guide and News

 

Real Estate FAQ


What is a foreclosure?
A foreclosure is the process by which a lender can recover the amount owed on a defaulted loan by selling or repossessing the property securing the loan. This process is initiated when a borrower/owner defaults on their loan, and the lender files a public default notice called a Notice of Default, or Lis Pendens.
What are the ways in which the foreclosure process can end?
The foreclosure process can end in one of the following four ways:
  1. The borrower/owner can reinstate the loan by paying off the default amount during the state law specific grace period. This period of time is also commonly referred to as pre-foreclosure.
  2. The borrower/owner can decide to sell the property to a third party during the pre-foreclosure period; allowing the borrower/owner to pay off the loan and avoid having a foreclosure on their credit history.
  3. A third party can buy the property at a public auction at the end of the pre-foreclosure period.
  4. The lender can take ownership of the property, with the goal of turning the property around and selling it on the open market. The lender can obtain ownership of the property through a short sale foreclosure or by buying back the property at the public auction. Properties repossessed by the lender are also known as bank owned, or REO (Real Estate Owned by the lender) properties.
What is a short sale?
A short sale happens when a property in pre-foreclosure is sold and the lender of the property agrees to accept a discounted payoff, meaning that the lender will release the lien that is secured to the property upon receipt of less money than is actually owed. The lender thus forgives the remaining balance of the loan, but is also able to unload the asset rather quickly. Short sales can be good for the buyer, the seller, and the lender. If you are the seller a short sale is likely to damage your credit, but not as much as a foreclosure would have. If you are the buyer, you get the property at a reduced price but the property may have its share of problems, and will need to go through considerable red tape in order to make the deal happen. If you are the lender, you will take a financial loss from the short sale, but not as large of a loss when compared to a full foreclosure on the property.
What is a pre-foreclosure?
A property enters pre-foreclosure when the borrower/owner misses a number (usually 3 or more) of mortgage payments and defaults on the loan secured by the property. Once this occurs the lender can file a Notice of Default or Lis Pendens (pending lawsuit) against the borrower/owner. During the pre-foreclosure process the borrower/owner can stop the foreclosure process by paying off what is owed, selling the property, or by transferring ownership of the property to the bank. If the borrower/owner does nothing during the foreclosure process, the property is sold at a public foreclosure auction at the end of the state law specific pre-foreclosure period.
How can I purchase a property in pre-foreclosure?
Pre-foreclosure properties create win-win-win situations for the owner who wants to get out of the property without damaging their credit, the lender who doesn't want to hold onto the asset, and the buyer who has the ability to obtain ownership of the property at a substantial discount. Buying a property in the pre-foreclosure process allows for distinct advantages for the buyer when compared to buying the property at a public auction or purchasing the property as a REO property. In order to purchase a property in pre-foreclosure, the buyer must negotiate any purchase agreements directly with the owner in default. Before the buyer contacts the owner of the property, it is always a good idea to contact the trustee or attorney representing the property in order to confirm that the property is still in pre-foreclosure. If the buyer is uncomfortable with contacting the owner directly, they can hire a real estate agent to help them through the process.
What is a foreclosure auction?
A foreclosure auction takes place after the state law specific grace period during the pre-foreclosure period has expired. Once the pre-foreclosure period has expired, the property is then taken to a public foreclosure auction. Most auctions are conducted in a public place, often at the county courthouse at a specific date and time. Individuals interested in bidding on the property must attend the auction in order to participate, and the winning bidder is usually required to provide a percentage of the winning bid in cash in order to successfully purchase the property. Bidders at auctions are not usually given the opportunity to fully inspect a property before the auction. The winning bidder may also have to evict the former owners if they refuse to leave the property once the property is purchased.
How can I purchase a property at a foreclosure auction?
In order to purchase a property at a foreclosure auction, the buyer should contact the trustee or attorney representing the property to confirm the auction date, time, and location. Buyers should follow the auction closely, as auctions can be postponed or canceled up to the last minute. When attending the auction, bidders can bid on the property being auctioned, with the property going to the highest bidder. When going to an auction, bidders must bring a considerable amount of liquid money such as cash or checks in order to put down the required percentage of their bid to acquire the property.
What is a bank owned or REO property?
Bank owned property; also called REO "Real Estate Owned" property is property that is owned by the lender. Properties that are owned by the bank have been repossessed by the bank/lender either through a foreclosure auction or deed in lieu of foreclosure which occurs when the owner in default transfers ownership directly to the bank. Buying foreclosed property owned by the bank is the most straightforward way to buy a foreclosure. The buyer does not have to deal with the owner of the foreclosed property as in a pre-foreclosure, and does not have to deal with bidding and producing large amounts of cash upfront as in a foreclosure auction. When buying a bank owned property, the bank/lender is usually very motivated to sell the property quickly being that holding real estate is not the business in which most banks desire to participate in.
How can I purchase a REO property?
When buying bank owned property, sometimes you can negotiate directly with the asset management department at the bank, and sometimes you will have to negotiate with a real estate broker that they have assigned. If buyers do not want to contact the bank directly, they can hire an agent to help them through the process. Buying a bank owned property is much like purchasing a normal piece of property. The only difference is that you are buying the property from a bank/lender rather than a traditional owner of the property.
Why is Syracuse a great place to invest in real estate, and why is this a great time to invest in real estate?
Syracuse has a very diversified economy, made up of many small and large businesses concentrated in a variety of industries. The city was recently named one of the 10 fastest growing real estate markets in the country by CNN Money, and has a very stable and historic past. The city and surrounding area is home to over half a million people and prides itself towards becoming a leader in green technology. The area provides its residents with an enjoyable lifestyle and a close tight knit community. Right now is an excellent opportunity for investors to invest in real estate due to the current low prices and relatively low interest rates. As we look into the future, we can only assume that real estate values will eventually resume their increase in value. Real estate is a long term asset, and by buying low investors have the opportunity of getting into a piece of property at a discounted price that may not be available in the future ever again.