If any of you read the Petaluma Argus Courier on a regular basis, perhaps you came across my last article published on February 26th:

http://www.petaluma360.com/article/20090225/COMMUNITY/902250928

Feel free to read the full text if you like, but it was basically a piece about foreclosures and why sometimes the highest bidders don’t win in multiple offer situations.  At the close of the article I pointed out that contrary to what you may hear from various websites and talk-radio advertisements, you won’t be ‘flipping’ foreclosure properties for huge profits like it’s 2005.  Apparently one person was listening…

Sean O’Toole of Foreclosureradar.com and Foreclosretruth.com took ’serious issue’ with my comment, and posted the following reply on Petaluma360.com:  (see full post here)

Armand – I have to say that I take serious issue with your saying that ForeclosureRadar has ever claimed anyone can buy a foreclosure for pennies on the dollar. If you had ever visited our website, my Blog, our forums at ForeclosureTruth.com, read my posts at Inman.com, seen me on the news or heard me speak you’d know that not only does ForeclosureRadar not make those claims, we actively work to set the record straight.

I’ve personally purchased more than 150 foreclosures, but even with all my experience I have rarely bought a home for 50 cents on the dollar as other foreclosure services claim anyone can do.

Clearly you are frustrated with the REO process. We are working hard to provide greater transparency to the process and make it easier for Realtors(R) and the other professionals we serve to do business in this market. Unfortunately we can’t control the lenders actions, but we are doing our best to help.

Having recently purchased an REO, I will say that the terms of the offer are VERY important as you suggest. But that has always been the case. When the market was hot, sellers would often pick the best offer not only on price, but on contingencies, the quality of loan approval, and other offer terms – that is just good business sense.

My suggestion to buyers who are having trouble getting their offer accepted – find an agent with experience representing buyers in REO purchases, they’ll know how to submit a good offer.

Best Regards,
Sean O’Toole
ForeclosureRadar.com
ForeclosureTruth.com

Well Sean, thanks for your input.  Furthermore, I’m glad to hear that we seem to agree on a couple points. 

First, that even as founder of one of the most thorough databases of mortgage default data, even you agree that the best way to purchase an REO is to find an experienced Real Estate agent!  (foreclosureradar.com is a database of notice of defaults (‘pre-foreclosures’), notice of trustee sales (‘home auctions’), foreclosures and market stats)  If there’s any homebuyer who could manage on his own, it’d probably be you, and even you recommend using an agent. 

Second, that as you’ve found in your experience, rarely will you ever find a home for 50 cents on the dollar by scouring notice of default lists.  In Sonoma County at least, I’ll add, rarely will you find a home on the auction block that has any equity at all.  Local Realtors in this area are so on the ball, should anyone who’s late on their payments actually owe less than their home’s worth they’ll certainly be contacted and have the opportunity to sell their home before losing it to foreclosure. 

As far as your website is concerned and the claims that it makes, yes, I do owe you a ‘retraction’ – to my knowledge, you or your site never made the statement that you can purchase homes for ‘pennies on the dollar.’ 

However, being a member of your site for the past few months, I suppose I’m entitled to my own customer review. 

As a ‘visitor’ to the site, you won’t see much, mainly just some text about the site’s benefits, features, etc.  Buy an account, however, and you’ll see that trademark mapquest screen with the blue, green, and red dots as seen on CNN that’s liable to send chills down your spine at first glance!  Those dots, buy the way, represent properties in the three stages of default – ‘preforeclosure’, auction, and bank-owned.  Don’t worry though, many of those green dots (preforeclosure) are short sales that are already on the market, some of which have accepted offers and may actually sell and avoid foreclosure altogether.  The blue dots represent properties in auction status, where there’s a set date for them to be auctioned off at City Hall, and the red dots represent ‘bank-owned’ properties (properties that were taken back by the bank in a foreclosure process) that are probably already on the market. (and depending on your market, probably already sold!) 

Even as an agent with access to the MLS (the most complete database and archive of listings – the one that feeds Realtor.com and the rest) I’ll say that I find the site impressive.  I’ve been searching ‘preforeclosure’ properties (also known as ‘notice of default’) for the past 18 months or so through my title company but seeing them on a map is much more slick and informative.  There are some financial calculators for determining potential equity of a property or return on investment, a favorite listings manager, and even an IDX solution for agents.  Perhaps the most powerful tool the site offers are the market statistic reports which have made their way into the LAtimes and other large media sources: http://latimesblogs.latimes.com/laland/2008/08/estimate-1300-f.html

However, with all the bells and whistles, we still have the question of value … is it worth it to the average homebuyer?  At $50 a month – yes and no.

Yes in what I call the ‘neighborhood watch’, that is, you can literally track the amount of pending foreclosures (and possible distressed properties) in any neighborhood that you’re considering.  Find a neighborhood or home that your like and then zoom in to see how many foreclosures will be popping up in the next few months.  In most cases, the more foreclosures there are, the more property values will drop.  And yes in pure entertainment value, log-in and appear savvy to your friends or colleagues!

No in the simple fact stated earlier by the site’s founder himself.  The best way to buy an REO property is to find an experienced Real Estate agent, period.  As far as bidding at auction is concerned (buying a true foreclosure and not a bank-owned property) in the lower price ranges I’d recommend against it 90% of the time.  Buying a home at auction is a complete as-is sale with no inspections or rights of rescission (most of the properties in the lower end in Sonoma County are moderate fixers or worse), many buyers don’t even have the financial resources to begin with, and furthermore, in case you haven’t noticed, there are plenty of REO properties available on the open market!  Many REO properties have also been rehabbed to qualify for FHA financing, making them an option for the low downpayment buyer, and tenant-ready for the investor. 

If you’re looking in the high-end market then inspections may not be as critical an issue.  However, the chances of someone willing to let his $600-$700K home slip away to foreclosure when he could have pulled out an additional $50,000 in equity isn’t too likely, he’d just sell the home first.  In other words, I doubt you’d find a high-end home even worth the opening bid amount in the Bay Area…you will find million dollar REO properties, however. 

So in the end, Mr. O’Toole, I’d say that your site does live up to it’s claim – it is the “professional’s choice for complete up-to-date information on every foreclosure in California”.  Super savvy investors, like yourself, who have bought many foreclosures before without a Real Estate agent will also benefit by using the financial analysis tools and just saving a heck of a lot of time in driving to the courthouse or title company every week to get the lastest NOD list.   As far as the average homebuyer is concerned, you probably won’t be buying a property at auction anyway, so find an experienced agent and tell her what you’re looking for.  She’ll get you to your ultimate goal of actually writing an offer and buying a home, not just looking at well-designed websites.

Thanks for the comment Sean,

-Armand Ramirez