Arizona investors have quite a few options for investing right now. The deals are every where you look. Unlike years past when your investment strategy was adjusted every couple of years, investors now seem to adjust every couple of months to keep up with the ever changing market trends. Buying at the court house steps seems to be one option that changes month to month. There are many things investors need to be aware of. One of the biggest questions is: When is a good time to buy? There are months that it seems there are no good deals and there are months that it seems trustee sales are the best option out there. You have to have your eye on the market more than ever right now.
Buying REO (bank owned properties) offers the luxury of walking the property and having time to get financing in place if you need it. When purchasing an REO property you also have the safety of Title Insurance from the moment of acquisition. This is not so when you are buying at trustee sale. You need to be sure you are buying a property where the 1st lien is pushing the property to sale to ensure a secondary deed of trust (if any) will be wiped away. You also need to be aware of any lien that would survive the trustee sale, such as a city ordinance violation or federal tax liens. All of this due diligence falls solely on your shoulders. Just remember this is a business acquisition and leave your emotions in the courthouse parking lot. Set your bid cap and stick to it no matter how fast your adrenalin is pumping. Should you chose to hire a bid company, the risk of emotional bidding is eliminated but be sure to read the contract you sign with them because typically they do not take any responsibility for the due diligence. You may have a favorite title company that is willing to do a quick search for these deal breaking items discussed earlier, but again they do not guaranty that there will be no issues. Remember a commitment for title insurance is NOT title insurance. Title insurance can not be issued until you are the owner of record. Once the gavel drops you own an equitable interest in the property that is proven by the receipt you obtain from the trustee. You are NOT the vested owner until the trustee’s deed is properly recorded with the county recorder’s office. If you are purchasing the property to resell as soon as possible to an owner who will be obtaining financing, you now have to be aware of the “seasoning” issues that may arise. We are all well aware that most conventional lenders require “seasoning”. You may remember this word when working with FHA buyers a few years back. We now have this issue with buyers who are getting conventional loans. Seasoning is when the end buyer’s lender requires that you own the property for 90 days prior to reselling that property. Some lenders do not even want you writing a contract until the 91st day of ownership. So, the quicker you can get that trustee’s deed recorded the better. The lender starts their count on the day of recordation, NOT gavel drop at trustee sale. On the flip side, if you purchase REO you may have a deed restriction of 90 days. The bank may also stipulate in your contract that you can not resell the property for 90 days. Some banks will assign a dollar amount to their restrictions which can be better as long as you do not sell for more than that banks cap amount. Bottom line, there are often more deals when buying REO properties but you can also have more restrictions when selling. Buying at trustee sale will give you more freedom but also can be higher risk if you do not do the proper due diligence. Always do your homework – the cardinal rule to real estate investing. Keep your eyes and ears on what is going on in both the REO market and buying at trustee sale. Each has its own risk and its own reward but can ultimately be a great investment. Keep investing, happy hunting and remember Chicago Title is here to help with anything you need!