naughtybear
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Post by naughtybear on Sept 6, 2016 12:55:51 GMT -5
Is it difficult to buy a foreclosure. Are they auctioned, need to buy with cash?
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Tiny
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Post by Tiny on Sept 6, 2016 13:46:41 GMT -5
Depends on what you mean by difficult. In my neck of the woods the foreclosures/short sales usually are listed with real estate companies (usually not big name ones). In my area, it helps a tremendous amount if the real estate person handling the sale has experience selling foreclosures. If they are a newbie, the process may go slower AND you might want to have some clues about the process so you can keep it moving.
Depending on the state of the foreclosure it may be a cash only (which could come from a mortgage or a HELOC on another property) or some other guaranteed funds - like a mortgage on the house you are looking to buy --but that means you may need to have the mortgage lined up BEFORE they will consider your bid which might be difficult since the bank may not want to finance a house in run down shape.
That said there are mortgages (203b?) that banks will give you which will give you the funds to buy the rundown house AND the funds to fix it up (the bank basically writes a mortgage for the value of the eventually fixed up house before it's fixed up). You probably want to have a realtor/mentor who's gone thru this process OR have a lot of time on your hands and be very hands on with chasing down all the paperwork/requirements you need to do. It's not as bad as it sounds.
I bought a frighteningly low priced cheap sad and sorrowful uninhabitable Fannie Mae owned foreclosure with "cash" created by a new mortgage on my paid for primary house. The hardest part was the search (looked at dozens of houses) and rejected bids (on a handful of houses) before I finally got one.
My brother recently bought a much nicer/bigger but run down bank owned foreclosure using a 203B? mortgage. It worked out well for him - he did it without investing much money in the whole transaction. It took nearly 4 months (and a lot of leg work from my brother) to get to the closing (it kept being put off because some bit of paper work was missing or needed to be updated or whatever). The house cleaned up nice, is rented and thanks to appreciation/local housing market he has equity.
The whole process can be long and have lots of ups and downs but if you are persistent and have a realtor who's dealt with foreclosures it's not too difficult (just stressful).
Sorry that I'm assuming the 'foreclosure' property is automatically run down or in need of work. In my area, any foreclosure/bank owned house that's in vaguely 'move in condition' goes thru a big name realtor and is handled just like any other sale - no hoops to jump thru - I think getting a mortgage on this kind of house is easier (it's habitable and in move in condition - it may need paint/carpet/appliances but all it's major systems are in good working order).
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happyhoix
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Post by happyhoix on Sept 6, 2016 15:03:11 GMT -5
I am not an expert AT ALL but my understanding is that unlike normal sales, where you work with a seller who is usually motivated (and therefore quick to respond to your bid and often agreeable to dropping the price a little, or other negotiations like covering some of the closing costs) in foreclosures you are dealing with banks, who are neither quick to respond nor likely to negotiate much.
I don't think they require all cash, but it would probably speed up the process or make the bank more likely to sell it to you.
On the plus side, if you're patient and willing to wade through the paperwork/wait around a lot you can get a good deal on a reduced price house. Just be sure you have it inspected first, sometimes if people are losing their house to foreclosure they can do crappy things to sabotage the house because they're mad at the bank. Which is fine if it's just cosmetic things like paint, not so fine if they rip up the floors or remove all the cabinets/fixtures.
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milee
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Post by milee on Sept 6, 2016 15:12:01 GMT -5
Not only do people being kicked out of a house do crappy things to it, but if a bank has foreclosed on it and is selling it to you, they will not have the same legal liability to disclose known issues. If you buy it from an individual, in most cases that individual is legally required to disclose all known issues - from past termite damage to leaks to ... the bank, on the other hand has no such knowledge or obligation so it's truly "as is."
Not that you can't get good deals on a foreclosure, but this is a very specialized area and if you don't know what you're doing you can get royally hosed with no recourse.
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Deleted
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Post by Deleted on Sept 6, 2016 15:27:07 GMT -5
And if you do buy a foreclosure, change the locks the second after you close. A former deadbeat neighbor lost his condo due to foreclosure and after the closing, he and his wife tried to break in/see if their keys still worked, but the new owner had the brains to change the locks ASAP. The deadbeat is a dumbass.
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NomoreDramaQ1015
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Post by NomoreDramaQ1015 on Sept 6, 2016 15:30:02 GMT -5
Not that you can't get good deals on a foreclosure, but this is a very specialized area and if you don't know what you're doing you can get royally hosed with no recourse.
The house next to us was a foreclosure. The landlords who bought it got for $30k. The basement had not been drained/cleaned after the Missouri flooded five years ago so there was black mold and cracks in the foundation that had to be fixed. ALL the copper had been stolen out the house and that had to be replaced. Siding was falling off, roof had to be replaced. That's just what I remember I know they listed a lot more.
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justme
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Post by justme on Sept 6, 2016 15:39:28 GMT -5
From my understanding is foreclosures go to auction which are often hard to buy without all cash. If they don't get the minimum at the auction the foreclosing bank "buys" the property and it becomes bank owned and they try to sell it.
My condo was bank owned. They sold as is but allowed inspection and I could have walked. For my particular one, not sure if all are like this, the first 8 days in the market were for owner occupied offers only. At the end of 8 days they would take the highest/best of the offers if there were any, if not it was open to anyone. There were two offers on mine. Both were full price one asking for 3 percent closing (about 4500) one asking for 3k. They even went back asking for final and best, the 3 percent didn't change his so I won the place over 1500. I asked my realtor if I could counter with 4000 closing lol!
If they didn't fuck up my name on the paperwork I probably would have gotten the 4500 cuz they got confused and wrote it down from the other offer. But they screwed up my name and in the process of fixing that realized their other error.
They did require a 45 day closing when the standard was 30 and the bank still fucked up and my closing pushed back another two weeks.
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naughtybear
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Post by naughtybear on Sept 6, 2016 15:41:00 GMT -5
I was looking for the financial aspects of the deal. I know about being hosed, no recourse etc, I would go in expecting that kind of stuff. People can be assholes.
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NomoreDramaQ1015
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Post by NomoreDramaQ1015 on Sept 6, 2016 15:55:29 GMT -5
The house next door was a bank foreclosure when it was finally purchased. There are some I've seen listed for auction. Then there was another listed with a real estate agent that was soon to be foreclosed on. The kicker was you were not allowed to do a walk thru and the people living there refused to have any pictures posted of the inside of the house. You could only go by the outside of the house. It made me wonder what they planned on doing before they were forced out.
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haapai
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Post by haapai on Sept 6, 2016 16:06:28 GMT -5
I bought one in Michigan in 2010. In my area realtors seemed to enter a pool for listing most bank-owned properties and sorta described them as being "dropped on" them after they had been emptied, winterized, and the locks changed. There wasn't a whole lot of money to be made on them and they did not show well. Realtors seemed to treat their foreclosure listings as PITAs and, man o man, did they languish on the market. I heard a lot of stories of realtors or banks doing incredibly poor jobs of trying to shift properties and a few allegations of realtors not making good faith efforts to sell properties in order to drive the price down even lower or sell them to friends or themselves. On the other hand, I also saw well-priced foreclosures sell within days of finally being listed.
I used a buyers' agent, which probably saved me a ton of time and frustration and I was lucky to buy a house that was listed by an agency that specialized in selling VA and HUD foreclosures. He was probably a lot more organized and on the ball than the average sellers' agent, although I never saw him or any of his agents.
State foreclosure law varies tremendously as do practices for getting the house sold to a new owner. It is tremendously helpful to understand how foreclosure works in your state. Understanding the length of the process will tell you a lot about how long the house has been neglected by someone who was losing it and how long it has been empty and rapidly deteriorating. The deficiency amount is usually public information.
Don't expect the realtor to be able to answer even simple questions regarding the house, like when the prior owner moved out, or whether a tree fell on it, or why there are Miss Dig flags on the front lawn.
I did almost all of my research on foreclosures on my own in order to save my agent's time and decrease the amount of sales pitch that every single person involved in the buying and selling of houses inevitably exudes. (It helps to remember that all of those pros (realtors, inspectors and mortgage wonks) basically make their money by selling houses.0 I found the registrar of deeds incredibly helpful. Sites designed to help Michigan homeowners facing foreclosure were also tremendously helpful.
ETA: In my state, foreclosed properties do go up fore auction at a sheriff's sale but they almost always go to the bank for the amount of the deficiency and then get sold via a realtor at the end of the reclamation period for a heck of a lot less, usually half of the deficiency or less. Not many people buy property at sheriff sales unless they have inside knowledge of the house and know that it is worth more than the deficiency and can come up with the cash or financing requirements.
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Tiny
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Post by Tiny on Sept 6, 2016 16:20:49 GMT -5
And if you do buy a foreclosure, change the locks the second after you close. A former deadbeat neighbor lost his condo due to foreclosure and after the closing, he and his wife tried to break in/see if their keys still worked, but the new owner had the brains to change the locks ASAP. The deadbeat is a dumbass. It's not always up to the buyer to change the locks... As part of the sale my uninhabitable house had some of the locks changed... it has a huge custom built garage with security doors/locks (some previous owner worked on cars - the garage was a perk to me as a buyer). I wasn't loud enough/clear enough before the closing - because the locks that could be changed were changed (on the house) and ALL the old keys were discarded - which included the keys to the security doors on the garage, the security storm doors on the house, and the locks on the wrought iron fence gates -- even though those locks were NOT replaced. I got a set of 2 keys when I was expecting a ring filled with keys (6 to 7 keys) at closing. I was PISSED beyond belief that they tossed the keys to the locks they couldn't 'cheaply' change. Having the keys to those locks would have made my life alittle easier and a LOT less expensive.
(FWIW: I knew the keys existed - I witnessed their use when I toured the property with a real estate agent).
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haapai
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Post by haapai on Sept 6, 2016 16:50:00 GMT -5
FWIW, the folks who discourage first-time buyers from buying foreclosures are probably right. I did it anyways, but it sure helped to be single, a numbers and spreadsheet geek, and a friend of someone going through foreclosure. It also helped that I had more cash than most first-time buyers and qualified for USDA financing, which allowed me to put my downpayment into the roof instead. I shudder when I see couples half my age with kids in tow looking at foreclosures. There are so many mistakes to be made and so many ways to be over-optimistic regarding what things cost and what you can afford.
There are many unknowns involved in buying a bank-owned home and quite a few more costs than usual. Getting a bead on what kind of property taxes you will eventually be on the hook for is quite tricky. We had a thread that touched on that recently. (Do your own research and math!) It's quite common for the utilities to be disconnected and all of the appliances missing, which adds a couple hundred dollars to the price of the inspection and sucks a couple grand out of you when you move in.
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haapai
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Post by haapai on Sept 6, 2016 17:10:41 GMT -5
FWIW, I bought a house in a town that ran its own water plant. The prior water bills were public information and listed online along with the tax payments. This was quite helpful in determining how long it had been vacant. I imagine that charges/leins for overgrown grass also show up quite often.
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justme
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Post by justme on Sept 6, 2016 17:36:26 GMT -5
And if you do buy a foreclosure, change the locks the second after you close. A former deadbeat neighbor lost his condo due to foreclosure and after the closing, he and his wife tried to break in/see if their keys still worked, but the new owner had the brains to change the locks ASAP. The deadbeat is a dumbass. It's not always up to the buyer to change the locks... As part of the sale my uninhabitable house had some of the locks changed... it has a huge custom built garage with security doors/locks (some previous owner worked on cars - the garage was a perk to me as a buyer). I wasn't loud enough/clear enough before the closing - because the locks that could be changed were changed (on the house) and ALL the old keys were discarded - which included the keys to the security doors on the garage, the security storm doors on the house, and the locks on the wrought iron fence gates -- even though those locks were NOT replaced. I got a set of 2 keys when I was expecting a ring filled with keys (6 to 7 keys) at closing. I was PISSED beyond belief that they tossed the keys to the locks they couldn't 'cheaply' change. Having the keys to those locks would have made my life alittle easier and a LOT less expensive.
(FWIW: I knew the keys existed - I witnessed their use when I toured the property with a real estate agent).
Even if they didn't change the locks they might not have everything. I don't think the original owners gave the bank anything. The bank changed the front locks when they got it and that's it. I only know they changed the front cuz it was new and a different brand. The patio/balcony came with no keys and I had to buy the gate clickers, pool pass, and rekey the mailbox all for around 150. I also didn't get the condo documents, luckily I was friends with three management so I got an electronic version for free...though somehow paper copies showed up from I think the title company over six months later.
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Tiny
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Post by Tiny on Sept 6, 2016 18:05:48 GMT -5
I was looking for the financial aspects of the deal. I know about being hosed, no recourse etc, I would go in expecting that kind of stuff. People can be assholes. If you are buying a bank owned foreclosure that's in move in condition - you might not have anything other than the typical expenses - the mortgage expenses, moving expenses and then the typical cost new owners have: lawn mower? maybe replace some light fixtures, maybe need to cope when an appliance dies unexpectedly - ie have some cash on reserve to cover unexpected stuff the first year.
There are nicer foreclosures - a couple of weeks ago I took a look at a very nice 2 bed/2 bath condo in my area - all it needs is to be repainted (it's done in early American Cave - so every room is painted in some dark color - like chocolate or deep maroon or deep purple.) I'm sure there will be other stuff (maybe a new ceiling fan, maybe a new garbage disposal, there may be some outlets/switches that need to be replaced...) but over all the kitchen and baths were in good condition AND they are asking a reasonable price. Unfortunately, it needs to be owner occupied - so I'm out of the running on buying it. The buyer who gets it will most likely purchase it just as they would a non-foreclosed condo.
Oh yeah, generally, the buyer of a foreclosure (no matter what condition) isn't responsible for unpaid taxes (you will be responsible for prorated taxes from the date of purchase), and old bills (city water, utilities, etc) should have been discharged/cleared up. It may be different in your area.
Also, You may be responsible for bringing the property up to code - even on the nicer/move in condition ones - but THAT depends on your local codes. You may need a city inspection of the property (in addition to your own house inspector). It helps if you are familiar with what's code and what's not (sometimes a good foreclosure real estate agent can help you with this) when looking at properties.
You definitely want to have some cash on hand (or access to money and the ability to pay it back) for AFTER the closing when buying any property.
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