This post will update daily with new foreclosure listings in San Francisco mid-peninsula locations. Below you will find an introduction to buying a foreclosure property as a personal residence or investment.

• There are foreclosure properties available on the San Francisco Peninsula. In the mid-peninsula, many of these can be found in Menlo Park, Redwood City, and East Palo Alto – typically areas near and on both sides of Highway 101.
• More specifically, the majority of foreclosures are located in neighborhoods where the average price at the peak say 2006 was $700,000 and below. There have been very few foreclosures in neighborhoods and cities were average price was over $1,000,000 at the peak.
• Some are good buys, some are not. Some houses are totally destroyed and others are in reasonable condition. They can be a good opportunity for first-time buyer or small investor.
• Like any investment, one needs to understand that particular market to do well.  Any buyer interested in considering buying REO foreclosure homes, should find an agent who knows the market in the specific neighborhoods where foreclosures can be found. For investors, finding an agent with local specific neighborhood of rental values who performs property management functions including Section 8 rentals is of high importance.
• Foreclosure REOs are currently priced (depending on area) around 50% of previous sale price.
• Most REOs receive multiple offers, many of them cash offers. Most properties go quickly.
• REO banks require SOLID pre-qualification, proof of funds to close (bank or investment statements), both for offers that are financed and for all cash offers, and a copy of earnest money deposit check (EMD).
• If the condition of the property is poor, property probably will not qualify for FHA loan.
• Buyers of foreclosures need to understand any REO purchase contract is prepared by the REO bank, no changes allowed. Contract is totally structured to protect REO bank - we, the seller know nothing about the property, totally as is, no warranty, no repairs, buyer beware.

That’s OK. Buyer needs to do his own due diligence.

Below you find find new foreclosure listings on the San Francisco mid-Peninsula.

Showing properties 1 - 5 of 14. See more Only Foreclosures.
(all data current as of 2/5/2012)

The past 18 months I have been quite active with investors who typically pay cash for a foreclosure REO in either East Palo Alto or east Menlo Park.These investors typically fix the property up and place back on the market for sale. These transactions are known as flip due to the short turn-around time from original purchase as an REO and then re-sale to the “end user” – either an owner occupant or long-term investor who wishes to rent the property out.

Last year, FHA had a rule that stated they would NOT fund any purchase of the property that was originally purchased within the past 90 days. In fact, they would not fund a loan on a property when the contract for sale was entered into less than 90 days after to the last purchase date.

So if an investor bought an REO August 1, 2009 – fixed the property up and put it back on the market, any buyer wishing to use FHA financing to purchase the fixed-up house could not ENTER INTO CONTRACT on this property until 90 days after August 1, 2009 or November 1, 2009.

After a while, FHA realized this rule was messing up the market. In areas hard hit by foreclosures, it was in everyone’s interest to get these foreclosure properties sold, fixed up, and then re-sold to owner occupants. Having distressed vacant properties all around a neighborhood does nobody any good.

FHA then amended the rule to allow funding of flip properties. However, there are some strongs attached.

Justin McHood in BiggerPockets lays out how different lenders apply this FHA 90 day flip rule.

So if you are considering buying a property with FHA financing and you believe the property was recently purchased, be sure to have your agent find out the date of the prior purchase and then contact your specific FHA lender to see what their guidelines are.

Last summer, I was chosen by Habitat for Humanity to be their exclusive buyer agent for Habitat’s Neighborhood Revitalization Program. Coldwell Banker and I donate the majority of any commissions earned on these purchases back to Habitat.

This Habitat program has been funded in part by contributions from the City of Menlo Park.

The City has considered buying properties in Belle Haven and doing the rehab work. Instead the City has made a wise decision IMHO in helping Habitat with their program. The bottom line is Habitat can do a better job doing what they always have done than the City that has no experience in these types of programs.

Last night, the City authorized additional funding for this program.

This will allow Habitat to continue their mission of restoring abandoned dilapidated homes to provide low cost affordable housing to deserving families.

For those unfamiliar with Habitat’s program, let me provide a little information.

Habitat purchases foreclosure homes (REOs), locates a deserving family that will occupy the home provided the family provides a number of hours in “sweat equity” during the rehab of the home.

After purchase, Habitat funds the rehabilitation of the buildings. This funding is combined with volunteer labor (many local contractors provide their services for free) and the labor of the occupant family.

Upon completion of the home, the new family “purchases” the home from Habitat who provides a ZERO interest loan to the new family. This allows the home to be affordable to families who must earn less than 50% to 60% of the median County income.

This is a wonderful program helping deserving families obtain safe quality housing as well as helping the larger neighborhood by removing blighted homes from the neighborhood.

Due to this program, several families will be moving into their new home within the next few months.

There are two ways to buy foreclosures:
1. Go to trustee foreclosure sale on the “courthouse steps”  with cash for any offer you may make.
2. Wait until bank forecloses takes title, and lists property for sale on mls (REO).

#1 is are not for inexperienced investors (not saying you are )
#2 is a good way to go – depending on area, there may be a good stream of new REO properties coming on market.  you will work with a real estate agent to prepare offer just like you would on other non-REO houses on the market. competitive bidding on these. must be solid solid on financing or pay cash.

Please let me know if you have questions or would like more information on the above.

Here’s how the foreclosure process works in California and it will help you understand the dollar amounts quoted.

To start the foreclosure process, lender must file notice of default (NOD).

At the present time, I would say many lenders wait until 6 to 12 months of missing loan payments before filing NOD. By law, they can file after one missed payment, typically.

From that point, owner has 3 months to bring missing payments current.

During this period, the lender if they publish any amount, it will be just the amount of the missed payments.
So if you see amounts like $11K and $30K, they are probably the total amount due on missing monthly payments.

After the 3 month period, owner has to pay off loan IN FULL including principal.

During this period, the numbers “published” will look like $254K or $586K – principal amount of loan plus all missed payments.

If owner does not pay in full 21 days after the end of the three month period, lender will set for sale at foreclosure auction.

Typically opening bid will be the total amount due. Buyers will need to pay cash on the spot. Recently, I hear reports of some sales going off below the total amount due. Often trustee sales are cancelled or postponed.

Hope that helps explains the process. I am happy to answer any questions you may have about the process.

Of course, any home owner who is faced with foreclosure should IMHO, contact an attorney to obtain legal counsel on the process and one’s specific situation. 

Arn

I previewed the following East Palo Alto for a client of mine today.

2384 Oakwood Drive 3 bedrooms 2 baths $209,000.

This is a REO property.

I have written several times about the real estate potential available in east Menlo Park and East Palo Alto.

Property values in these areas have dropped about 50% from their peak.

First time buyers can now buy a single family home on the Peninsula at an affordable price.

Investors can buy fix and flip or buy fix and rent for longer term investment.

1107 Sevier is a 3 bedroom 1 bath home listed at $249,900.

Below you will find a few “amateur” videos of the property. Contact me if you would like to see.