Buying a foreclosure

[Starry436]

Anyone bought a foreclosure or have advice on doing so?
I would be referencing one that's not in rough condition, in fact it's pretty clean to of been sitting through the summer and it's not in a bad neighborhood. We typically don't have many foreclosures in our area so I'm unsure of the story here.

I just didn't know if there were some super major things to be aware of in terms of financing them and such.

[snafu]

No experience in that market but recall reading the frustration expressed by those buying because the paperwork was extensive and worse, repeatedly late. The problem is once your move is in motion, it's pretty complicated to make changes as there are utilities to arrange, mail forwarding, DMV, days off work [if you get that benefit] and Amazon orders arranged for delivery for example.

If you are relinquishing a rental I suggest you arrange some temporary accommodation with a friend or relative...should it be necessary. Likewise check with mover if your load can be held [for a fee] until everyone has signed off and the keys are yours. Your lawyer and realtor can likely offer specific details in your community.

[Starry436]

I get what you're mentioning. I have hesitations because it is foreclosure but there is potential to make changes for added value or we could move in as is and it would still be fine. At this point we're debating an offer but I'm indecisive and struggling to make the decision.

[james.hendrickson]

Starry,

Just thinking out loud here - I would get the place inspected and be sure the sale is contingent on the inspection being clean.

It's possible that the previous owners fell on hard times and couldn't pay, but it is also possible there was something wrong with the place that lead to the previous owners abandoning it.

At one point I bought a rental property in the District of Colombia. The place was advertised as a triplex. But, when I went to city's office of records to check up on the place, it turned out that the bottom apartment was never approved as a legal residence. So, thats a problem.

I don't think anyone was trying to pull a fast one in my case, but you never know about a foreclosure. It pays to get the place checked out.

[~bs]

never heard of any foreclosures like that. they're normally sold, as-is. some sold sight unseen (other than what you can see outside). if the foreclosed property is currently occupied, the former owner may decide to completely trash the place before he moves out.

[msomnipotent]

never heard of any foreclosures like that. they're normally sold, as-is. some sold sight unseen (other than what you can see outside). if the foreclosed property is currently occupied, the former owner may decide to completely trash the place before he moves out.

Like putting cement in the pipes.

You would be responsible for any back taxes, unpaid liens, or association dues. I was told that it can also take several months to close on one by both my realtor and my mortgage broker, but I forgot why.

[kork13]

never heard of any foreclosures like that. they're normally sold, as-is. some sold sight unseen (other than what you can see outside). if the foreclosed property is currently occupied, the former owner may decide to completely trash the place before he moves out.

Like putting cement in the pipes.

You would be responsible for any back taxes, unpaid liens, or association dues. I was told that it can also take several months to close on one by both my realtor and my mortgage broker, but I forgot why.

My father has purchased 3 of them in 2009/2010 (when housing values crashed & everyone was underwater & getting foreclosed on), and each one has come back to bite him...hard. He bought them all through county auction.

The first was a really nice house, in a nice neighborhood, in great shape, but still occupied by the previous owners (who had been foreclosed upon months ago by the bank...they were basically squatting). When my dad went to take possession of the house, they flipped out. He had to call the sherriff to evict them, and in the meantime, they trashed the house so badly that they caused tens of thousands of dollars in damage. Smashed the walls, pipes, sinks, glass, smeared feces & filth everywhere, flooded the main floor, and so on. The HOA and the county both had undisclosed liens on it as well, so he eventually ended up having to just let it go, and it was repossessed by the HOA. 100% loss.

The second was a small condo, which again had undisclosed liens on it and only barely met their needs as a place to live. After he paid the lien to get the title in the clear, he ended up selling it at a loss because my parents weren't comfortable in the place.

The third is a nice house in a nice neighborhood, but had been abandoned for almost a year (in south Florida), so the walls were all moldy and the house required a great deal of rehab to make it livable (they lived in the small condo while it was getting fixed). Although he bought the property at county auction, the bank still contested ownership of the house for the mortgage, so they took my dad to court not once, not twice, but three times (so far) demanding that he pay the bank for the mortgage balance before they'll release the title to the house. He's spent the last 7 years in & out of court fighting for the title, which he still doesn't have. Funny thing...without title to the house, he can't insure the house. In Miami. With annual hurricanes. What could go wrong? With Hurricane Irma rolling through (likely right on top of Miami), it's going to be a tense week.... So he's basically squatting in the house, waiting for the bank to either give up, or he's got to wait the allotted time (10 years?) until the state's squatter's laws can take effect and he can sue for ownership based on long-standing occupancy & maintenance of the home.

Back when he was buying these properties (all within a ~6 month period), he tried to convince me to let him buy a foreclosure for me to keep as a rental. Looking back, I'm VERY grateful that I didn't let him talk me into it, seeing how much of a mess it has been for him.

Based on his experiences, I have zero intention of ever going anywhere near foreclosure/short sale properties. It would take a great deal of research to make me comfortable enough to make such a purchase, and frankly, I don't feel like it would be worth it.

[Fishindude77]

I bought one knowing pretty much what I was getting into. The place was a mess and needed lots of clean up and work.

Biggest thing you need to do is do a title search to see who might have liens against the property. Pay a title company to do this. Would be a bummer to buy the property, pay off the bank, then find out a credit union also held a lien for borrowed money against the property which you would have to pay off.

[amarowsky]

Starry,

Just thinking out loud here - I would get the place inspected and be sure the sale is contingent on the inspection being clean.

It's possible that the previous owners fell on hard times and couldn't pay, but it is also possible there was something wrong with the place that lead to the previous owners abandoning it.

At one point I bought a rental property in the District of Colombia. The place was advertised as a triplex. But, when I went to city's office of records to check up on the place, it turned out that the bottom apartment was never approved as a legal residence. So, thats a problem.

To further support this, I bought a foreclosure in 2010. I had to do city mandated changes to property (ones I strongly don't believe were necessary) to get the house up to code and obtain a CofO (certification of occupancy) to allow me the legal right to live in the home. These totalled $7500 that increased / renovated the home almost not at all.

So be wary on the rules to trigger a home to loose it's CofO. (in Michigan / Wayne county) that was triggered by not legally being occupied for 1 year.


Further on the foreclosures that are available, in good shape, and have been sitting available in nicer neighborhoods. I would imagine they are very very very rare. Especially because home prices are so high right now. Your best bet would probably be a real estate auction, to find a low value. And according to what I've read, these are not ideal for getting to choose your area or even allow for significant strategy/analysis and inspection of your prospective home.

I would say you may have luck researching "seller financing" as a possible avenue. This is looking for people who want to save the premium for selling a home in the form of marketing it themselves. They appear to be motivated and sometimes flexible in how they will structure the sale of their property. This will get the margin for purchase closer to what the value of the house is (by removing some of the RE agent premium).

Just opinions, I've been conducting some significant research in real estate recently.

[TexasHusker]

The allure of buying a property in foreclosure is that you are potentially buying it for well under market value. Usually that does not work out.

A little background:

Generally it is a bank that is disposing of the property. The borrower has presumably defaulted on the loan and the bank is re-selling the property. Most homes occupied by defaulting borrowers have a laundry list of deferred maintenance. Leaks, dead yards, a HVAC unit that has not been maintained, termites, rodent infestations, etc.

If the borrower couldn't pay the mortgage, they certainly were not able to keep the place in good repair.

My experience has been that, unless the local real estate market is really soft, banks are going to get as close to market as they can - there is no reason for them to drastically reduce the property, and a bank certainly knows local fair market values - they are lending money for houses every day.

There might be a low price attached to the house - perhaps at first appearance below market - but once you take into account the time and expense of rehabbing the house, you are often better off just buying a nice house at a fair price.

The DIY and HGTV shows tend to glamorize the whole "fixer upper" deal. I've watched a number of these, and there is no way, for example, that their rehab numbers are close to accurate a lot of the time.

Buyer beware.

[~bs]

might be worth it if you're able to buy at a deep discount, then don't mind doing most of the fixup work yourself. Perhaps during the next recession if you can buy the property for very cheap. That also implies you have skills as a tradesman, painter, carpenter, electrician, plumber etc. Paying a contractor to do the work would be extremely expensive.

[Starry436]

Thanks for the feedback.

We didn't even know it was a foreclosure until the realtor told us because the landscape was manicured, in a nice neighborhood, new granite, new high end appliances, fresh paint and all new flooring in the entire house so we really had no idea. Once she told us that's when we pumped the breaks a bit and in our area we generally just don't have many foreclosures. But this one is being sold by some bank out of state.

Ultimately we decided not to offer for it, just got scared away by the potential disaster of owning one. Because even though it appeared ok, you all are right about not knowing what you can't see.