San Diego Real Estate Foreclosures- What You Need To Know

by Tiffany

Think buying a San Diego foreclosure is impossible?  You’re not alone.  Whereas buying a property foreclosure is not impossible, it is a daunting challenge that is not for the faint-hearted.  The above video is meant as an exaggeration of reality, but sadly it’s not far from the truth.  The foreclosure-buyers that I have had the privilege of representing can attest to that.  San Diego foreclosures are among the most competitive listings that prospective buyers could wish to obtain, even if the buyer has the standard list of “good things” going for them…loan pre-approval, good credit, money for a down payment, extra money in the bank to show a history and enough for closing costs, a steady well-paying job, W2 records, ability to close escrow in 30 days or less, an offer above asking price, not asking for any “extras” in the contract, etc.  Whew!!  And that’s only the beginning.  Of course your trusted Realtor and Mortgage Broker will be taking care of most of that for you, and walking you through the process of buying a bank owned foreclosure step by step, but it still doesn’t mean that you’ll get the foreclosure property you’re wanting.  So, what are some things you need to know when buying foreclosures?


Your Realtor should take the time to educate you about what a foreclosure is and the process of buying one.  A foreclosure sale is different than a traditional sale.  To put it simply, buying a foreclosed home is buying a home that someone was no longer able to pay for.  They are also called REO’s (Real Estate Owned), or seized homes.

The former owners may have damaged the home before leaving it.  It’s not uncommon for me to walk into a foreclosed property only to find bleach-stained carpet, no kitchen sink, graffitied walls, and holes in the ceiling.  I’ve even had the privilege of entering a home that was human-urine soaked.  Eewww!  It’s always a good idea to get a home inspection, but especially is it necessary with a foreclosure.  The former owner could be leaving many surprises for you that you don’t want to discover after you’ve already purchased the home.  So don’t get seduced by the low price of the home.  It may be priced so low because of having major problems.  Get a home inspection!  Of course, the inspection process only happens after your offer is accepted.


Your Realtor should have experience working with foreclosed properties.  The negotiation and closing process is different when dealing with a Bank as opposed to a standard seller-owner.  If your Realtor is experienced, this just may give you the upper hand. They should take the time to prepare and explain a Comparative Market Analysis (CMA), and tax records of the property, so that your offer is first-and-foremost priced right to compete.

As opposed to private-sellers, the bank will most likely send out a counter-offer which stipulates their requirements, and normally asks for a higher dollar amount if you’ve offered under asking-price.  Your Realtor should also explain that for your offer to appear attractive to the bank, sometimes you’ll have to pay for the “extras” yourself.  For example: termite reports, title insurance, home warranty, etc.  The less you appear to be a “high-maintainance” buyer, the better your chances are of being chosen.

This may sound confusing to you, because isn’t it still a buyers market?  Yes it is, because most sellers are selling at a loss, and in the case of foreclosures these sellers have completely walked away from their homes.  This means that buyers are still getting properties for prices that have otherwise been unheard of, or at least not heard of for a long time.  The buyers of foreclosures are, in many cases, buying below market value.  So yes, it is a buyers market.  The problem is the competition of the many buyers that are wanting to take advantage of these great opportunities to buy in San Diego.  Along with your Realtor, make your offer clean, simple, and to the point.  Your Realtor will help advise you of what things you can reasonably expect to ask for, and which items in the contract are just bells and whistles that you could live without.  This is key in foreclosure investing.


With these foreclosed properties getting hundreds of visits from prospective buyers and their agents, you should expect that the property will receive 20+ offers.  In a large way, it’s a numbers game.  The more properties you make an offer on, the better the chances that one will be accepted.  I hate to see the look of disappointment on my clients’ faces when they’ve made only one offer on their “dream property”, only to find out later that they never stood a chance because of being outbid by an all-cash investor.  If you’re serious about buying a property in San Diego, you must be serious about making offers.

It’s hard to tell what a certain bank is looking for in an offer for a particular foreclosure property.  At times they’ll accept the FHA or VA offer over the all-cash investor, because they need to show diversification on their books (although these types of loans are typically the most difficult to get accepted on a foreclosure because of strict appraisal requirements).  In that case your offer is up against the other FHA or VA offers, and only one will “win” the property.  Go look at properties with your Realtor, and make offers (plural) on your favorites.  Homes that you can really see yourself living in.  You will be accepted on one of them, if you’re patient.


If your Realtor is worth anything at all they will have other “secret” tactics that can be used to ensure you are doing your utmost to acquire the foreclosed property.  For example, without giving them away, there are certain clauses that can be included in a contract to give you an edge in this multi-offer world.  Contact me directly to discuss these options.

Your Realtor will also want to be in constant, friendly communication with the Transaction Coordinator the bank is using to handle the offers.  This will give you a leg-up on the other offers where their Realtors may not be doing this.  Sometimes it’s just a matter of the back-office staff taking a liking to your Realtor, and knowing that he/she will be easy to work with.  This could make all the difference in their recommendations to the bank.  That being said, it helps to have chosen a Realtor who is likable.

I hope these suggestions have helped to explain the process of making offers on San Diego foreclosures.  Feel free to contact me directly to discuss new foreclosures and pre-foreclosures in your preferred area, get a free foreclosure listing, and schedule a personal tour of these bank foreclosed homes.

Tiffany Homa

Your San Diego REALTOR®

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