How to Buy a Cambridge MA Foreclosure

Foreclosures, Bank Owned and REO (Real Estate Owned) are terms commonly used to describe properties that are owned by a lender (financial institution; typically a bank), after an unsuccessful sale at a foreclosure auction or property obtained by a “deed in lieu.”  The lender will then resell the property by direct sale or market through a Realtor. Buyers often benefit by purchasing Cambridge MA foreclosures as the lender's interest is to dispose the asset quickly and aggressively price them to reflect market conditions.

When a Cambridge homeowner defaults on their mortgage, the lender starts the process of obtaining the right to sell that property at auction in order to satisfy the debt (balance owed on the mortgage). In Massachusetts, this process takes a minimum of 75-90 days and if the homeowner contests the process in court or files bankruptcy the delay can be significant.

In Massachusetts, non-judicial foreclosure is the most common method; judicial foreclosure is rarely used in MA. Lenders usually have a power of sale clause and must abide by stringent notice requirements. The bankruptcy court allows sales to be overturned if the amount of the sale was less than the market value of the property. Therefore, lenders in Massachusetts are very cautious in meeting the requirements set forth in the law. You may review the laws at Massachusetts Foreclosure Laws.

For most consumers, purchasing at a foreclosure auction is a "risky" undertaking and, in most cases, they will opt to purchase from the lender after the auction.  As a result, not many Cambridge MA foreclosure auctions end with the sale of the property. The title reverts back to the financial institution holding the line. These properties are referred to as REO (Real Estate Owned) or Bank Owned properties.  Auctions are posted according to the law so you will find notice in local and regional newspapers.

After a bank (lender, financial institution) takes possession of a property (after an unsuccessful auction), they mitigate items owed by the prior borrower, such as homeowner association fees. The financial institution also tries to get the IRS to remove any tax liens against the property. The current owners are usually evicted and repairs made to any damage on the property in order and to make it more attractive to potential buyers and maximize the value.

Banks want to sell foreclosed property quickly because they don't want to tie up their money in capital reserves. Additionally, managing a foreclosed property is an expensive process and a "headache". Some banks have experience in managing REOs and foreclosures and often have a department dedicated to them.

Most lenders hire experienced real estate agents to market their properties and list their inventory in the Multiple Listing Service (MLS) to ensure full market exposure. Lenders are motivated sellers and want to obtain the maximum market value in the shortest time possible. Buyers have the opportunity to view, investigate and inspect the property prior to final agreement to purchase. Some lenders will negotiate repairs and concessions, but in most cases their preference is to sell “as is” at a “discounted price”. Visit Cambridge MA foreclosures to register for a list of current bank owned real estate for sale.

Banks do not like disclosure statements but understand that they must conform to federal and state laws. They will always state that they have no knowledge of the property and can make no representations as they have never occupied the property. Banks may or may not provide incentive financing on their REOs but in most cases, this would apply only to property that was in very bad condition. Financial institutions usually sell such properties "as-is"; however buyers still have the opportunity to negotiate home inspections if they find "unknown material defects".

If a buyer discovers issues that they did not anticipate, and which the institution will not repair, they can then cancel the transaction (given that the home inspection contingency was included as part of the offer to purchase contract). Institutions may agree to repairs but prefer to "discount" the property to a potential buyer and close quickly.

Time is money to a lender. It is not in a buyer's best interest to attempt to renegotiate a contract over trivial items that were disclosed or obvious prior to negotiation of the contract. Generally, negotiating with a lender is an easier process than negotiating with a homeowner. Lenders are typically unemotional about the process and are interested in making a "good business" decision for their stockholders.

A Cambridge MA bank owned property isn't always the best value for a consumer. It's an old myth that "foreclosures" are a bargain. Consider all Cambridge MA real estate including MLS listings and short sales.

Before making an offer, have your agent contact the listing agent and ask typical questions you would ask of any seller and some additional ones such as:

• Are there any inspection reports?
• What work has the bank agreed to?
• Is there a special "as is" form?
• How long does it take the bank to accept an offer?
• How does your agent deliver the offer?

The negotiating process can be very frustrating for buyers as the typical timelines do not apply and understand that lenders do not work on weekends.

Make sure that your offer contains your "credit" approval which demonstrates your qualifications as a buyer as the lender is more motivated to negotiate with a qualified buyer. Understand that lenders will sell at "fair" market value and do not expect "fire-sales" that you have seen on television.  The “best values” are typically properties that need substantial structural and mechanical repairs.  Since there are fewer buyers qualified to buy these properties, lenders will offer greater discounts.

Virtual Homes Real Estate agents will provide you with a list of Cambridge MA foreclosures and bank owned real estate for sale.  In addition, we can represent you as a Buyer’s agent and represent your interests in the property search, research, negotiations, home inspection and closing of the transaction.