"Foreclosure homes" Topic

I am waiting orders to move finally back home to Albany NY. My wife and I have been thinking of Saratoga area but some homes are very expensive so we have been thinking of looking into buying a foreclosure home has anyone here bought one? Did you have good experience or a bad one. Did you have to pay off the remaining loan or was there a new one? I am reluctant to call a realtor and ask how they work just for the simple fact of they just keep calling you or send you never ending e-mails.

I'd like to hear peoples experiences that are not on late night get rich schemes as well. I have been warned they can be real money pits since they often have been abused or neglected.

LLC aka Ron

You can get a really good price when you buy a foreclosed house. Just be sure to get title insurance from a good and reputable company. Use a title insurance company with real people and real abstractors with at least 10 years of experience to be sure that they dig up and resolve any title issues BEFORE you close. The nightmare scenario would be that you put a lot of money down on the house and buy it and then realize there are outstanding liens and that maybe you don't actually own it after all. Some of these issues may not surface, either, until you try and resell it.

I have done some work for this lady:
titleinsurancetalk.blogspot.com

Search the blog for foreclosures and see what she has to say.

Jaime

My realtor tells me that many foreclosed homes are not being sold at auction, they're being listed in the MLS like any other house for sale. You won't know it's a foreclosure until you make an offer on it. I've been told that a bank selling a foreclosure may be more likely than an owner to accept a lowball offer. I can't prove any of this, it's hearsay.

Usually the lender is trying to recover their loan amount. Depending on the market, that could be much less than what the house is worth. In other markets, it could be nearly 100% of the home value (and possibly MORE).

That being said, money in hand is better for the bank than letting it sit on the market

I have several relatives who are realtors. One specializes in selling foreclosures. Zippy and Saber are right in that most of the foreclosures are listed in MLS like any other house and the banks usually just want their money back so you can get some really good deals. Unfortunately, you buy the house 'as is', which commonly isn't all that great. After all, the folks getting kicked out certainly didn't care, didn't clean it, and there's often damage.

However, if you're going to repaint/remodel anyway, then it may not be that big a deal.

No personal experience, but, as the others are saying, let the buyer beware.

The local paper has been running articles almost weekly of people trashing their homes or just generally neglecting them prior to foreclosure.

Just last week was a story of a couple in a fairly nice neighborhood who have made no mortgage payments in 8 months. The bank is in the process of foreclosing, but it will still take a few months for everything to be settled. In the meantime, the couple is going through a nasty divorce, partly because the man lost his job (leading to the lack of house payments), and partly because the woman has a mental illness and can no longer afford her medication (or she simply refuses to take it).

Consequently, they have been systematically trashing the home. They have removed everything that isn't nailed down, including appliances, light fixtures, doors, and even the mailbox and some small trees and bushes. They've also punched holes in some of the interior walls – "remodeling" is what they call it, but it's obviously just trashing the place. The yard has also gone to hell.

However, since they still own the house, they can do what they want with the property.

I've read of other cases in which the owners removed all of the copper wiring and plumbing from homes being foreclosed.

Personally, I wouldn't touch a foreclosed home. With non-foreclosed house prices falling in general, it's just not worth the risk to me.

My father is currently out in Mississippi looking at a couple of the houses listed on hud.gov/homes/index.cfm (which is probably the only way to go without having to worry about getting ripped off). A couple of lenders literally gave him a couple of places just to get them off their books. They require some repairs, generally. In Houston, he'd purchased a few that were in similar condition, but as he's a general contractor, he can usually put $15-$20k into them (doing his own work or hiring local talent) and then sell them for a profit.

The one in Mississippi, he's passing on, however. The place has been abandoned, and then looted. And the other houses on the same street are in the same condition. I'm going to eyeball a couple of houses he's looking at in Cleveland for him while he's in South Bend working on a house on University Ave.

As far as foreclosures, you'll see two extremes. The best are when the homeowners basically handed the keys over and walked away. But before they left, they cleaned everything up. Some realtors are offering cash bonuses if the owners do this. The other extreme is that the house is well and thoroughly trashed. EVERY fixture has been removed or destroyed. Sinks were stopped up and the water then turned on to overflow into the house – and worse.

The point of all this is that you really need to inspect whatever property you're interested in and have a good idea of what it'll cost to make it what you want.

Wyatt

Consequently, they have been systematically trashing the home. They have removed everything that isn't nailed down, including appliances, light fixtures, doors, and even the mailbox and some small trees and bushes. They've also punched holes in some of the interior walls – "remodeling" is what they call it, but it's obviously just trashing the place. The yard has also gone to hell.

Yes I can understand that. I would get mad if someone took my home.

Luckily I was able to help a friend just before the bank repossessed their house. He was then able to sell for a decent price and has been able to get back on his feet.

I am in the middle of negotiating a "short sale." We really like the place and it will not take much to make it our retirement home. Foreclosure has been initiated on the property, but it not gone to the courthouse for auction yet. The owner has been trying to sell it for almost a year in a terrible market. I have made an offer for less than the balance owed, but close enough that the bank will probably look at my offer as the best way to limit their losses. On the plus side, the house is in good shape and the owner has a motive to keep it that way. On the down side, we have to work at the bank's bureaucratic pace to get an answer. If it works, we get the place for a great price. If it doesn't work, I can still try to get it at the courthouse auction.

Over the last 2 months, I have looked at dozens of properties that were in various stages of repossession. jpattern2 has a pretty good description of what I have seen. Some houses are in immaculate condition and well worth the price. Others have been completely destroyed, with every wall damaged, a toilet thrown thru the 2d floor window, every appliance, electric switch and outlet and interior door missing. One even had most of the wiring torn out.

Stay away from the TV advertisers for the "secret" lists of foreclosed properties. Every decent realtor already has it or you can get one free at the county courthouse. Most of these homes are already listed on the MLS and usually say "Bank Owned" on the seller ID entry. You can also tell if it is a foreclosure by the foreclosure notice hanging on the front door or window. If you choose to go this route, be prepared to put some money into the place to repair the damages and neglect. The property probably has been sitting empty for at least a year, maybe close to 2.

Another option is the route we are trying: a short sale. Banks don't want to be in the real estate business, especially now, and will rather take a known loss up front. With over 7000 foreclosures scheduled for this month alone in the Atlanta metro area, the banks are doing a lot of short sales. Just be prepared for them to go slow making a decision.

When dealing with a foreclosed home, you can get a really good deal if your make sure of the following:

Make sure your offer is subject to a thorough inspection, to insure the house is in good working order…ideally do the inspection after a heavy rain to make sure there is no leaking

Second, make sure a reputable title company confirms a warrants that the title is free a clear

Lastly, do a thorough search for any leans by any contractors or other vendors and especially any property tax liens.

If the house has been "trashed" you may actually get a better deal, but you need to know how much it will take to get the house back in order…

A friend of mine purchased a $1 USD million home for less than $250,000 because after the house was foreclosed, someone broke into the house and trashed it so badly it no longer could be occupied until it got a new CO (Certificate of Occupancy) establishing that the house was fit to live in.

My friend put $350,000 in the home and now lives in a magnificent home that cost him $600,000 and even in these depressed market times would sell for $800,000.

Bottom line, make sure you know what your getting and you can get a great deal…if you don't you can get burnt…

One last thought…if you buy a foreclosed home or not check to see how many foreclosed homes or homes in the process of being foreclosed are in the neighborhood…each foreclosed home in a neighborhood lowers the resale value of all other homes in a neighborhood by about 2.5% give or take…

Hence I would avoid a neighborhood with a cluster of foreclosed homes and focus on one where tragic circumstances created a rare opportunity to purchase a home at a great price…

Lastly, be prepared to walk away if you can't get your price…currently, banks are months behind on foreclosures and therefore there will be many more opportunities to purchase a home in the upcoming year…

With respect to people trashing a home that they have been foreclosed on…I would suggest that one should feel little sympathy for them except where a personal tragedy has occurred…

First, if the family still has jobs and lose their home, they are likely to be able to purchase a new home at at a discount to the cost of their old home…even with a ding on their credit…

If they could not afford the home in the first place and were counting on appreciation to dig them out of the hole that they dug themselves into when they purchased the house…then as speculators they lost, but in many cases given how long it takes to foreclose on a home, the cost of the house was likely not much more than renting a similar place…

Less you think I can't relate to these issues…my daughter is in the process of losing her home…like others she stretched more than she should have to buy a home and then took out money from the home in the form of a home equity loan when it appreciated…now she is going through a divorce and the housing market has dropped back 15% or so in her market…

Bottomline, she put 5% down borrowed 20% more when the house appreciated and though she has offered to turn it over to the bank, they have told her they will get back to her for awhile…in the meantime she is keeping it up but not paying any mortgage payments (since with her divorce she cannot afford them)…while her circumstances are tragic…in the end she will have "made" money on house compared to renting when you factor in her home equity loan…and she will suffer a serious "blackmark" on her credit that will take several years to rectify…but given her circumstances that might in the end by for the best…

Anyway good luck in finding a home…and do not buy anything that would prevent you from living on 80% of your take home…give 10% to God and 10% to your retirement…and you will be surprised how well off you are in 20 years…

With respect to people trashing a home that they have been foreclosed on…I would suggest that one should feel little sympathy for them except where a personal tragedy has occurred…

My friend lost his job and then his wife wasted the redundancy money in a failed business venture. Luckily I feel that in the UK (like in the rest of Europe) you are looked after better when you have lost it all.

Perhaps I am unusual in feeling sympathy for people in crisis.

Another tip to save money is to hit people who are divorcing.

They usually need the money quickly so you can pull off a very good (well for you anyway) deal.

"With respect to people trashing a home that they have been foreclosed on…I would suggest that one should feel little sympathy for them except where a personal tragedy has occurred…"

Not doing maintenance because they were trying to make the next mortgage payment? Sure. Trashing? No.

Our first house was a foreclosed home, we qualified for it under the HUD program. The place was a wreck. Needed to put a new roof, 13 new windows, 3 new doors, subfloor, floor, insulation, walls, plumbing, 3/4 electicity, water heater. Got it for about 63K, mortgaged 10K more for repairs, sold it 5 years later for 137K, guy who bought it from us gutted it and resold it for 250K.

It was a learning experience. The house had been abandoned and vandalized. The plumbing needed replaced after the guys who did the water test didnt bleed the lines and all the pipes froze and cracked, same story with the water heater. I'd defy anyone to find a right angle in the house.

I now own a house that wasnt expensive, the mortgage isnt too bad, but my current employer (public school district) doesnt pay much and with fuel costs going where they are, its getting harder and harder to meet my obligations as the cost of everything is going up. My mortgage is only about $700/month fixed rate which wasnt bad at all 3 years ago. It fit right in with the 80/10/10 plan. Problem is, cost of living is far outdistancing my paycheck.

To pay my way through grad school, I would find houses, live in them while I fixed them up for resell. This all worked well until I got a foreclosed home. I bought it off a MLS from a realtor, but the selling bank will not turn on power or water or anything so that you can inspect it. Now, I have bought houses that were wrecks, but noting as wrecked as this foreclosure house was. The worst financial decision of my life. I am still playing for it.

Both a brother and a sister of mine have bought houses at auction (for back taxes I think). They had very little time to do any inspections, but that worked out better because the water and electric were on. Not a perfect situation, but much better.

And just last month, a friend bought a house down the street from me on foreclosure. She somehow worked a warrantee (from the realtor I think) to cover the cost of repair of un-disclosed problems. Now she paid very nearly market rate, but with such a warrantee, she should not have to face all the problems that I had to with my foreclosure.

In summery: most of the time your either pay up front or your pay in the long run. It is very hard to save a lot of money unless you are willing to live with real problems.

DyeHard

I'm one of the lucky ones – I bought a foreclosure in an "up and coming" neighborhood in Washington DC for a terrific price, back in 1998. However, I was well warned!

The house was "as is" and the group of bicycle messengers who lived there before it was sold had NO inclination to hand over a clean house! OMG, there is probably STILL bits of glitter between the hardwood floor boards! It also needed substantial work on the roof, pointing in the brick, replacing decking, repairing walls, upgrading electric, etc. Again, I knew all this going into it because I had a good buyer's agent and an excellent inspector.

The advice further up to get a reputable title agent is not to be taken lightly! And if you find problems with the title, be prepared to stick it out for a while until problems are resolved. In my case, the property was not foreclosed upon in the manner appropriate to a DC property (I'm guessing the foreclosure agent was out of "state" and used whatever procedures that state uses, but DC is its own beast in all regards, so naturally it has its own way of doing things which MUST BE OBEYED) So it had to be re-forclosed which means all the notices and waiting for 45 days for responses to the notices had to happen all over again. I ended up waiting 6 months for my house to clear all its title woes. During that time, DC property values went up substantially and the Bank holding the foreclosure (the seller) made me several offers if I would quit my contract. But I had the flexibility of waiting, so I didn't bite and I ultimately got a townhouse at a good price.

And have been working on it ever since. . .