buying forclosed properties?

Anyone here have any experience with that? I'm in the middle of a divorce and it sounds like I might need to sell the house and try to buy something cheaper. I'm looking at just about anything other than a cardboard box under an Interstate overpass at this point...

A guy at work is buying a foreclosed house. Takes a lot longer than a regular deal. Avoid Bank of America at all costs, as they will drag their feet and screw it up. Six months later, your deal is blown because they won't give you a title and you start over with another house. If you can find one that Fannie Mae or Freddie Mac "owns," it might go smoother.

I never understood how BoA even stays in business.. It seems like everything they touch turns to ashes due to high fees and generally being run by inept baffoons

I work for a company who puts together rental properties for investors in Phoenix. Every market is different, but we do not have many foreclosures on the market anymore, all the properties get snatched up in the short sale section and do not often make it through the foreclosure process. Those that do usually are true disasters. Cash is king and find a agent that specializes in short sales and is high volume. They may have a lead network to get you first crack at a property before it becomes a bidding war. YMMV based on location.

Just did it early this year. Sort of an odd circumstance, though. I was laid off, and basically liquidated my 401k to pay cash for it. Before the crash, the place was valued between $120-130K. I bought it for roughly half that.

First thing I'd recommend is to make sure it's in an area/neighborhood you can stand to live in for awhile. If you can't meet the "primary residence for two years" requirement, you're going to have big trouble finding a lender offering a decent rate (real estate speculators are treated differently than people who want to be homeowners).

I guess I really can't tell you anything else about financing, since I didn't have to borrow--I guess I'll just stick to the practical stuff.

Every single foreclosure I looked at needed work. This one needs some non-structural foundation repair (solid enough to support the weight, but needs moisture barrier repair), a proper primer & paint for that awful 90's masonite siding, and a few windowsills replaced. There's also other stuff that is "broken", but IMO not necessary. Example would be the power garage door openers. Both motors still run, but the mechanical bits are trashed. I just popped the safety catches, and open the door manually.

When you look at a property, pay special attention to big-ticket items like HVAC and appliances. Often, even if they are present, they can be faulty due to how long they've been sitting unused. Try to find out how long the property's been vacant, and try to snag one that hasn't been empty for long. I personally think we got lucky..our had only been sitting for about 18-22mos. (from what we can tell), and it seems to have survived in pretty good shape. All we had to do was re-plumb the hot water heater and throw a thermostat on the central heat/AC. Closed on a Tuesday (nothing like a cash closing, easiest one I've ever had!!), slept in it Friday night. Dishwasher even worked, all we had to replace was a fridge (we already owned our own clothes washer/dryer).

Actually, the water heater thing reminds me of something else: check for signs of illegal entry and/or vandalism. Again, we were lucky, the thieves took the copper connecting the heater to the water pipes, but none of the other copper in the plumbing. One of the garage doors was trashed (but shored up well enough to prevent another entry), one of our rear doors has one pane of the double-paned glass missing, and the front doorjamb shows evidence of repair (a poor repair.. ).

In short: none of them are pretty. Most of them are incredibly cheap. Some of them are livable without immediately having to dump $10K into the place. Personally, I think I stole the place. If I could find any work at all, most of the problems would already be solved (I can do most of the work, but supplies cost money). I don't know if it will help, but here's a link to the thread I made here when I bought the place:
http://grassrootsmotorsports.com/forum/off-topic-discussion/locksmithing/45685/page1/

Good luck, man. I know these things are never pleasant.

To the OP: Thought about renting instead for a while?

mad_machine wrote: I never understood how BoA even stays in business.. It seems like everything they touch turns to ashes due to high fees and generally being run by inept baffoons

BofA ia a protected class like the snail darter. They are officially "Too Big To Fail" and the laws favor them.

Yes, buying foreclosed property isn't as easy as buying a home from a homeowner so the only reason you'd want to do it is if you got a killer deal.

Depending upon the part of the country you're in, which means less than 3% of the U.S.A, you need to be asking yourself "Why was it foreclosed upon in the first place? And can I resell it when it's time for me to move on?" Most of the country didn't get massive value decreases so usually the answer as to why it was foreclosed upon is a house or area problem so you want to stay far away from them.

You usually don't get any special financing terms to buy them, unless the property has such a huge issue that no regular lender will touch a loan on the property, so once again WHY BUY A FORECLOSED PROPERTY - unless it's a screaming hot deal?

Also foreclosed properties are bought "As-Is, Where-is". Which means any work it needs now OR ANYTHING THAT HAPPENS TO IT PRIOR TO CLOSING is your responsibility. I had a house near me that was foreclosed upon and the house was broken into prior to closing and the kids built a bonfire in the living room. The guy couldn't get out of the contract so he forfeited his $5,000 earnest money. It's quite common to go to closing and find the A/C's been stolen.

In reply to pres589:

Thought about it, yes, but in this market renting anything with two bedrooms in a decent neighborhood is going to cost roughly what I'm already paying in mortgage. The only way to significantly reduce my financial obligations is to roll the dice and look at something like FriedGreen's situation.

FGC covered the high points. I did something very similar and for the same reasons you are.

Fannie/Freddie are going to put the thing up for bids. It's not the usual auction format as in: you will not know what others are bidding, only that theirs are higher or that you are in the lead. Their system is frustrating to say the least. But it does work, after a fashion.

I made an offer on another non-Fannie which was an online bidding format. That works very similar to eBay, and it has the same problem eBay does: you can get sniped at the last minute by a small amount. That's what happened to me, and in retrospect it was a good thing.

I avoided short sales because those things can drag out forever. The bank can hit the mortgage holder with a 'deficiency judgment', i.e. if the sale proceeds come up short of what the bank is owed they can go after the current mortgage holder for the difference. So a low offer which could put you in good shape will probably be rejected by the current homeowner if a DJ is in place. If the property is 'upside down' (they owe more than it's worth) that really screws things up. The bank is going to want a say in the whole thing as well, which adds another layer of problems. If you have signed a contract to offer, put earnest money down, the shouting and pointing starts and something else good comes along you are in a pickle. To give you an idea: I looked at one short sale not terribly far from where I am now and the house had been vacant for nearly four years, there had been 7 or 8 offers, all rejected. No, thank you.

You will need to have your financial ducks in a row before bidding on a foreclosure. Since you are going through a divorce, it's not real likely that a bank will take a chance on you right now, assuming that you do have to finance. A lot of that is because during a divorce yes both parties do own some of each other's crap and if you buy something yes the soon to be ex can go after a piece of that in the settlement. For instance, if you buy a new car before the final papers are signed she can lay claim to a percentage of it.

As much as it will suxxor, you need to start laying the groundwork now, wait out the divorce and rent if you have to during that time, then start hunting in earnest.

It would not hurt to get on Trulia http://www.trulia.com/ and start hunting now, that site has a lot of 'lis pendens' and other pre foreclosure listings which will take a while to work their way through the process. That way when they show up on Fannie Mae or Freddie Mac's or the various bank sites you already know where they are and roughly where to start, bid wise.

Fannie Mae REO is called Homepath http://www.homepath.com/ and that's where I found the one I ended up buying. Freddie Mac's is called Homesteps, around here they had very little. http://www.homesteps.com/

OBTW: Zillow sucks greasy dirty donkey nards. Don't even bother hunting a house on there, although they are pretty good for checking the value on 'comps' (comparables) in the area you are interested in.

carguy123 wrote: Also foreclosed properties are bought "As-Is, Where-is". Which means any work it needs now OR ANYTHING THAT HAPPENS TO IT PRIOR TO CLOSING is your responsibility. I had a house near me that was foreclosed upon and the house was broken into prior to closing and the kids built a bonfire in the living room. The guy couldn't get out of the contract so he forfeited his $5,000 earnest money. It's quite common to go to closing and find the A/C's been stolen.

This is true. Main thing that helps is that FHA (and the RE companies trying to move these properties) tries to keep the time interval as short as possible between throwing down the deposit ("earnest money") and the closing. IIRC, it was only about a week or so..but then again, it might have just been because I was paying cash, and didn't have to spend any time finding financing.

I did drive past the place in the middle of the night a few times that week, though..I was a little nervous about it.

EDIT: Everything Curmudgeon said is spot on, I wish I'd seen his post before I replied. I actually won the "auction" because the foreclosure procedure was so far along that FHA was the mortgage holder. I actually "won" because i was paying cash instead of searching for a loan.

Once the property has been empty long enough that the bank who originally "owned" the loan that was defaulted upon is out of the picture, FHA is seriously interested on unloading the thing. It's no longer a "short sale" when the interests of a commercial bank are over & done with. Avoid anything where the deed is still held by the bank. The bank "will" hold on to that deed until they realize the property has deteriorated to the point where they'll never get the entire amount back. Even the banks understand that taking the FHA's money is a better deal than attempting to sell it themselves, once it's been sitting empty long enough.

This is why inspecting the property is so important..I actually coughed up the dough to have a professional inspect the place, even though (since I didn't borrow to buy) it was not "necessary". It was worth the money to know whether or not the place was still a house, or a "project".

Mine had already had the A/C swiped before I made the offer so that worked out OK, as in FM dropped the minimum bid.

Be sure to add any repairs to your budget; few things would be worse than to get a house then not be able to fix it.

Curmudgeon wrote: OBTW: Zillow sucks greasy dirty donkey nards. Don't even bother hunting a house on there, although they are pretty good for checking the value on 'comps' (comparables) in the area you are interested in.

Oh, sure, NOW you tell me... :)

FHA and the Fannies are the bank's last resort. They underwrite (guarantee) the loan and once the bank has decided they can't squeeze anything out of the mortgage holder they look to FHA/fannie to pay something. At that point the bank is no longer involved and the Fannies sell the property. It takes time to do that which is why I say check Trulia for something that's maybe been through lis pendens and the bank now owns it. Figure around 2-3 years for the elephant mating to conclude.

What is elephant mating? Plug in your favorite organization:

Getting decisions around here is like mating elephants.

1) It happens at a high level

2) It involves a bunch of roaring and screaming

3) It takes two years to get any results.

Curmudgeon wrote: OBTW: Zillow sucks greasy dirty donkey nards. Don't even bother hunting a house on there, although they are pretty good for checking the value on 'comps' (comparables) in the area you are interested in.

Actually Zillow is just about the worst way to check values as the County of San Bernadino just discovered. Zillow values turned out to be about 30% below the other price checking engines, which actually have little relationship to real values houses will sell for.

This totally changed their idea of what to do about the "housing problem" they had.

I guess I should have clarified that: Zillow's listing of 'sold' prices is a pretty good resource. I had cause recently to come up with a rough value for a house, Zillow's numbers for an actual sale 4 doors down were exactly the same as the listing on the county website but were up almost 2 weeks earlier. Dunno how they did it.

Not much to add but a note on Zillow or checking the county website for comps. My next door neighbor died and left the house to her two sons. One bought the other out so it shows a sale price of $56k rather than the market value of roughly $100k.

There are a couple others in my immediate in the last year with a similar situation. Those 3-4 homes almost singled handedly brought their "Zestimate" down about $20k.

You should be able to see what normal homes in a certain area sold for and weed out the highs and lows.

When my sister went through the purchase of a foreclosure, I recall her having an issue with insurance. She had to have insurance to buy the house, and she got a policy approved, but when she went to close the insurance company pulled the policy at the 11th hour. Something about it being approved pending certain things, and the FHA loan disqualified them.

Sorry I don't know the specifics, but the takeaway I got was to ask questions to everyone about everything, and explain everything in detail and get it in writing. The rules change significantly when you are dealing with anything unusual.

Having lived in a constant-remodel prior-foreclosure the last 7 years…

…if I had to do it again I’d just spend another $25k up front and get something newer, nicer, and closer to work.

Especially now- with real estate stagnating, you’re not going to see a big upswing in your property value that will offset the tremendous pain in the ass of living somewhere that always needs work. In other words- be sure you buy it at an absolute screaming deal. Just a “good” deal isn’t anywhere near good enough.

pinchvalve wrote: When my sister went through the purchase of a foreclosure, I recall her having an issue with insurance. She had to have insurance to buy the house, and she got a policy approved, but when she went to close the insurance company pulled the policy at the 11th hour. Something about it being approved pending certain things, and the FHA loan disqualified them. Sorry I don't know the specifics, but the takeaway I got was to ask questions to everyone about everything, and explain everything in detail and get it in writing. The rules change significantly when you are dealing with anything unusual.

That's one of those instances where the house or the location was the reason the house was foreclosed upon in the first place. If the house won't qualify for normal financing then you need to run away screaming.

Once again, in most parts of the country if it ain't an absolute screaming deal you'd be much better off buying a home from the homeowner.

And in case you haven't noticed the housing market has turned around with sales and prices rising almost everywhere. The hardest hit areas have been posting outrageously large numbers. And mortgage rates have been rising.

California prices have risen 11.5% to their highest level since 2008 and San Francisco sales are up 22.9%. I don't have the Florida numbers in front of me, but places like Miami have been posting sales are up something on the order of 33%.

Buy now or forever hold your peace.

Even Lending in the U.K is up 8% and they were and are in much worse condition that we've ever been over here.

Never had any luck at foreclosures/repos. Have looked at them but they always wanted market value for them and they all needed repair of some sort. Which would negate the benefit of buying foreclosed property. Looked into estate auctions also and same issue there although with proper bidding you could get a deal, depends on how you look at it I guess.

Maybe I'm one who bucked the trend, but the house we're in was a foreclosure, and our experience was relatively easy and pain free.

The house was built in 2006, but wasn't sold until early 2007. Original owner never made a payment to the bank. Not one. He was foreclosed on in Dec 2007 or Jan 2008 (owner had put it up for sale earlier, but at a really high price). The house sat vacant. My wife and I found it listed in December 2008, actually it was on Dec. 24th of all days. The price was an absolute steal, a raging screaming bargain. We got in to see it on Dec. 26th. We put in a bid that very day for the full asking price. We knew the house was being sold "as is", and so the sale couldn't be contingent upon a home inspection. However, the house was only a few years old, and there were no obvious signs of significant damage. Turns out someone else put in a bid only hours after we did, but since we were first, we got the house. We had to do a tiny bit of drywall work (homeowner ripped some kind of shelving unit right out), and very minor electrical (he ripped the dishwasher out in a hurry too), but that was basically it. The yard needed a lot of work, but that's no big deal.

I think I'd agree that if it were an older house and/or it showed signs that it may need some significant work, I'd probably run away unless it was almost free. However, there are a number of houses out there kind of like ours. Nice houses bought by someone who couldn't really afford them, and now the banks are left to unload them.

Klayfish wrote: Maybe I'm one who bucked the trend, but the house we're in was a foreclosure, and our experience was relatively easy and pain free. The house was built in 2006, but wasn't sold until early 2007. Original owner never made a payment to the bank. Not one. He was foreclosed on in Dec 2007 or Jan 2008 (owner had put it up for sale earlier, but at a really high price). The house sat vacant. My wife and I found it listed in December 2008, actually it was on Dec. 24th of all days. The price was an absolute steal, a raging screaming bargain. ....... I think I'd agree that if it were an older house and/or it showed signs that it may need some significant work, I'd probably run away unless it was almost free. However, there are a number of houses out there kind of like ours. Nice houses bought by someone who couldn't really afford them, and now the banks are left to unload them.

And therein is what made it work.

And you'd be surprised at how many foreclosures need SIGNIFICANT work. I close a lot of loans for them and I can't remember a one that didn't need multiple thousands of basic work. They get targeted by thieves because they know no one's going to call the cops on them.

You won't get any disagreement from me there. I guess it was a "perfect storm" for us. Screaming deal, nice neighborhood (very unlikely to have been targeted by thieves/vandals), newer construction. If you close loans for a living, I'm sure you've seen a ton of horror stories.

My wife and I know how lucky we were to grab this one.

My wife and I are moving further along the "buying rental properties as investments" road and are looking at some foreclosures. Fortunately we have a friend that specializes in that and so far seems pretty good at her job. We'll see how it works out! For now I don't have any specific input but as always recommend finding a good Realtor since they know the ins and outs and can sometimes find listings before they're actually listings.

I purchased and sold several foreclosure houses. That is to say, at the courthouse steps.

This is where the deals can be had. The one listed above, where the seller never made a payment...that won't be a good deal on the courthouse steps (because the bank puts forth the opening bid, which is generally what is owed by the borrower).

but...when you find one of those deals where someone paid on the house for 10 years and then, for whatever reason, defaulted on the loan...that's when you can find a good deal. The owner has paid down a significant chunk of principle and the bank can't make an opening bid of more than is owed them.

The majority of houses (heavy majority) that are in default are worth less than what is owed on them. Most of those go back to the bank and the bank puts them on the market at market value (which means they likely take a loss).

In my days of selling real estate (~5 years from 2003-2008 or so) as a salesperson I didn't see a lot of "screaming deals" make it to the market (meaning bank owned and listed with a broker). There were a few...a very few of those, though. They typically sold within hours, as would be expected.

Stroker, I sent you an email. We'll get together for a brew sometime this week or next and talk about this and other fun stuff...

Clem