What You Need To Know About Buying A Foreclosure Property In Santa Cruz [UPDATED]

Posted by Lauren Spencer on Monday, April 20th, 2020 at 2:39pm.

Buying a foreclosure home in Santa Cruz

When buying a home in Santa Cruz, it’s hard not to be attracted to a foreclosure.

Not only are these homes priced below market value, they are often located in some of the most desirable neighborhoods around Santa Cruz.

But sometimes, these homes are too good to be true.

They often come with a number of stipulations that you should know about before jumping at the opportunity.

To help you with your real estate journey, here are a few things you should know before you commit to buying a foreclosure property.

Types Of Foreclosure Properties

There are four stages of a foreclosure sale, and knowing the difference between them could help protect you as a buyer.

Pre-foreclosure or Short Sale

With short sales, the current owner still has control over the property and will vacate when the home has been purchased by a buyer.

This type of home is sold as-is, but in this case, buyers can opt for an inspection before the final transaction. This is a great perk that can help you determine whether or not the home is right for you.

But this doesn’t mean problems can’t arise with this type of sale. Learn more about some of the problems that can arise with this kind of transaction below.

Auction Sale

If a home doesn't sell in a short sale, it's sent to the auction block. These are typically executed by a third-party to help prevent a bias or playing favorites with properties.

During this, however, the lender can't make a profit at the auction. Any money that's made over the cost of the home will be applied to the outstanding liens on the house.

One of the biggest drawbacks for buyers is that these purchases are cash only sales—not many people are able to just stroll into an auction with enough bills to buy a house.

Also, if there are any outstanding liens on the house that weren't covered by the sale, you (as the new owner) are now responsible for them.

Real Estate Owned (REO)

If the property doesn't sell at an auction, then the lender assumes full ownership. This is the most popular method of purchasing a foreclosure in Santa Cruz as there is usually a lower risk to the buyer.

The biggest benefit to buying a foreclosure home this way is that many of the liens on the home are taken care of by the lender or current owner.

Government Owned

Government owned properties are similar to the auction homes in that you’re likely going to have to pay in cash. But, the various government agencies might be able to help out with the financing, depending on which agency owns the property.

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Things To Watch Out For If You're Considering A Foreclosure

Expect An Impersonal Experience

In most cases you'll be dealing with a lender or a bank, neither of which are interested in your needs as a buyer. Their main priority is to make the money back on the property, so if the numbers add up in their favor they'll make the deal.

Avoid The Auctions

It can be hard to pass up a really good price on a home, but even the smartest buyers sometimes get swindled at the auctions. Since you can't perform a house inspection, you're essentially flying bling and just relying on a hope that the house isn't in need of any major repair.

This could open up a whole new can of worms that you weren't anticipating, and make buying a foreclosed home a more expensive purchase than a brand new home could be.

Watch Out For The Former Owner

If the old owner is still in the home when you purchase it, you're now responsible for getting them out, which may be easier said than done.

It's an unfortunate reality that some owners are a little bitter about being evicted from their home, and can occasionally wreak havoc on the residence before their departure.

Get Prequalified Before Shopping

This is a pretty standard rule of thumb for anyone who's in the market for a home, whether it be a foreclosure, resale, or recently built residence. It’s important to get prequalified for a mortgage before you purchase a home so that you know how much you can afford and how much money you can put towards repairs.

Tips for Buying a Foreclosed Home in Santa Cruz

Distressed homes are often a great deal if you can get them at the right price; however, they can also be a gamble. The process is complicated and can be frustrating. Before taking this large financial leap, hire a real estate agent to help you evaluate the risks, find a good deal, and get the right price.

Below are tips for how you can stay on top of the process and get a great deal:

Find a Foreclosure Expert

While many agents can probably help you navigate these tricky waters, it’s best to find an expert who specializes in distressed properties. Lauren Spencer is your go-to real estate professional in Santa Cruz. No matter the type of property, she will be able to help you move quickly through this complicated process.

Be Prepared to Face Competition

Foreclosures in Santa Cruz are often snatched up quickly, which means you might only get one shot at a bid. You’ll want a seasoned professional in your corner to help you make a smart offer the first time.

Evaluate the Home For Repairs

An agent who is knowledgeable about foreclosures can give you a good evaluation on a distressed property. They’ll also have a list of home inspectors to give you a professional inspection and contractors to give you an estimate on repairs. You’ll want all of this information before you present an offer.

Attain a Loan From Your Bank

Not only will you need repair estimates for your offer, but you also need them when you apply for a loan. Banks are sometimes wary to provide loans on foreclosed homes, so be prepared to back up your figures with facts.

Although foreclosure homes can be a gamble, sometimes they’re a pot of gold. To ensure you make the right choice when buying a foreclosure home in Santa Cruz, have a real estate agent on your side. Lauren Spencer is the best in the business when it comes to real estate in Santa Cruz. Contact her to start your real estate journey today!

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MLSListings Inc Logo Based on information from MLSListings MLS as of May 26th, 2020 at 4:09pm PDT.
All data, including all measurements and calculations of area, is obtained from various sources and has not been, and will not be, verified by broker or MLS.
All information should be independently reviewed and verified for accuracy. Properties may or may not be listed by the office/agent presenting the information.