Often when purchasing foreclosuresbuyers are concerned about the quality of title issued by the lender. A common belief is that there may be liens or judgments clouding the title. This is a myth. The lender will bid at auction only if it wants the property. The lender, typically the senior lien holder, wipes out all junior lien holders or judgments in the process.
If the foreclosing lender does not bid at that sheriff’s sale or auction, it probably doesn’t want the property. This may be due to excessive superior liens, such as IRS or tax liens. (Tip: If the lender doesn’t bid for the property at auction, you probably shouldn’t either.)
The lender, in an effort to recoup its losses, will bid on the property, wipe out other lienholders, then pay the balance of outstanding property taxes to secure the property’s clear title. No lender will go through the time, effort and expense of foreclosing, only to lose the property for a few thousand in back taxes.
Having absorbed these costs, the lender generally adds them to the asking price and will sell the propertywith clear title. If you have heard that the lender must sell the property for what they paid for it at auction, forget it. Another myth is that all banks are bending over backwards to give away foreclosedhomes. It’s true that the lenders want to sell their foreclosures. Lenders, banks in particular, are corporations. These corporations are driven to make money, not to lose it. A bank has to answer to its shareholders just like other corporations do.
Brokers may have several investors lined up just waiting for a good property to turn up. Brokers can also assist the lender in determining market prices, suggest marketing strategies, recommend appraisers or contractors, etc.
Some lenders establish a set price for the property and will not allow the salesagent to consider offers for less. Many lenders dispose of their own properties. Depending on the size and complexity of its REO inventory, the lender may have one part-time clerk or a staff of special asset managers handling propertysales.
Lenders with larger inventories often have a staff dedicated to analyzing and managing the properties, while at the same time coordinating and managing the brokers retained to market the properties. The lender determines the strategy and the broker markets the properties accordingly.