Not a week goes by when I don’t get a call that goes something like this:

“Hi, we’re planning to move to the area and would like to look at foreclosures…I found a bunch of homes on the internet that are forclosures…what do you mean those aren’t real homes for sale…I found them on the internet! …Can I see the foreclosures, please?”

It’s a frustrating conversation that ensues as I try to (patiently) explain that a) Lancaster County is not swamped with boarded up homes and 3 foot high grass, and b) that even if they find a “foreclosure” the path to a successful settlement can be far worse than they imagine.

Yes, yes, I know that you keep hearing about all the foreclosures on TV. Trouble is, it’s not the same real estate climate in Lancaster County as in Detroit or Florida, OK? I for one am glad about it, too.

What’s going on here? What IS a “foreclosed house” and how do I get one, then?

I try to review the general process that a property goes through as the owner defaults on the loan (for whatever reason – no moral judgements). What’s that process, you’re thinking?

When a home goes into foreclosure, it is tied up in a fairly long journey of about 9-12 months of court hearings and administrative limbo. At some point late in that process it will generally come up at the Lancaster County Sheriff sale where the bank acts as both seller and buyer, taking the property as it’s own possession if no other party outbids them.

After that is all recorded, the bank then farms the hapless property out to an local broker representative who then puts it on the Multiple Listing Service for all buyers and agents to see. This agent also has to get any occupants out and have the place “cleaned” of debris.

Generally, the list price at that point is determined by the loan amount the bank is owed – often very close to actual market value anyway. The listing broker then fights the bank officer to get the list price down enough to reflect condition issues and hopefully gets an offer the bank will accept. (I know several Lancaster PA real estate agents who do this – not something I would prefer to do. I’ll help buyers, thank you).

The magic happens when a home comes on the market and the price is right! When this happens, a good buyer agent will get the buyer in there quick.

There are two ways that the buying public has access to “foreclosures” as they are termed.

1) Attend a Lancaster County Sheriff Sale and purchase one at auction (Auctions)
2) Purchase one through the MLS being listed by a bank or investor for resale (REO homes).

(OK, there’s a third way, that I only use with my professional investor clients – it involves letters of credit and intervention at the bank level – not for the faint of heart or the primary home buyer).

As a buyer’s agent, I work with many “foreclosures” and can say with confidence that Sheriff Sale purchases are risky to the primary home buyer (no guarantees of title, possible unknown liens etc) and time-consuming (there are potentially dozens to sort through and personally visit, many with the owner still there!). In the end the owner can STILL get the foreclosure delayed and the sale is a bust.

You are far better off as a single-home buyer to be looking for a bank sale through the MLS, where the seller has cleaned up the title and the contract process is more reliable.

Now, to the business that has caused much of this misunderstanding in the public:

One of the major contributing factors to my weekly phone calls are the endless “foreclosure” websites that purport to offer homes for sale and are very successful at sucking people in. These companies buy lists of properties in the foreclosure process, but not necessarily for sale. In 99% of the cases the information is either outdated or just plain incorrect.

I don’t know of anyone who has successfully used “foreclosure websites” as a tool to buy a distressed property. The most successful approach is to watch the new listings coming on the MLS and note low-priced properties. These could be foreclosure homes and will likely sell fast if the condition is acceptable. In any case, without a professional guide it’s all too easy to miss the real “deals”…

I can certainly understand someone’s desire to secure a “deal” for their next home, but as the age-old economic saying goes, “they’re ain’t no such thing as a free lunch”.