Foreclosures

[Diamend]

So... me and hubby are beginning to look at foreclosures. I'm always hoping I can find just that right house, in a great price... I'm thinking that even if it needs a new roof, if we are only paying $20,000 on it... why not!?

Actually though, we don't want to have to do a whole lot too it, I want it to be nice enough.... but being new to the home buying market I feel lost. I've read all of the home buying tips and stuff for first time home buyers... but with foreclosures I feel like I'm in a whole different world... Does anyone have any experience with this or any tips??

[StaceyMc]

Be very careful buying foreclosed homes. Most times, you're unable to get inside the house to check it out, if you're buying at a Sheriff's Sale, or something similar to that. There are some people who totally destroy the inside of a house when they know that the bank is going to foreclose.

[SerendipityCrafts]

My first house was a repo. We did get a chance to look through it and we did have it inspected and it was a pretty good deal.

The problem is that normally the houses are on and off the market in the blink of an eye.

As Stacy pointed out, a lot of them are trashed or vandalized. We saw about 3-4 other repos ... ick. We weren't brave enough to take on the DIY or rich enough to pay to have everything fixed.

We were lucky, the only thing the previous owners of our house were guilty of, is bad taste -
hey painted a floor black, painted a field stone fireplace wall with white plastic paint, painted one room turquoise from top to bottom and in between, and painted another room purple from top to bottom and in between. The bank paid to have the bedrooms painted and the floor sanded. We never did get around to sandblasting the fireplace wall ..........

[lize566]

I had originally thought we would try to get a forclosure, but along with what Stacey and Elizabeth said, thay can be hard to get. You have to get them before the bank does, b/c a lot of times once the bank repos them they aren't that great of a deal. You would have to go to an auction or find somebody in the business of buying forclosed homes. I don't mean to sounds like a downer, but it can be tough. Hopefully you can find one that doesn't require a complete remodel. Good luck!!

[shawnsgirl]

It's tricky with foreclosures...The experience we had were mostly thru realators. Most had No Disclosure. Around here when you buy a house the home owner needs to disclose certain information about the home...When things were replaced last, things that may be wrong..etc. etc. Even though it's not 100% and it still must have to pass inspection at least you have an idea of what you are getting into. But, because the bank owns the property they don't have that information to give you. As well, most of the homes were priced lowered that most houses in that area but with most people in our area foreclosing due to owing more than the property value thanks to interest rates and refinancing you weren't getting as great of a deal. Infact, with the experiences we would have made up for what we saved in repairs.

Most of the homes we came across had bad orders, on the brink of being condemned in my opinion, and needed a lot of work. Other were in the midst of being "fixed up" thanks to refinancing but abruptly haulted because of not being able to afford there home..

There was one house though that we did happen to look at that only needed a few modernization on 2 acres of land for a little over 100 grande. That was about the nicest house we came across.

I don't think looking into foreclosures are a good thing. Foreclosures get snatched up pretty quickly..If it's been on the market for a long time that can be an early warning sign too! Good luck!

[Diamend]

Thank you soo much for all of your advice ladies!!! Very helpful!!! We've stopped looking at foreclosures...actually we've stopped looking at houses completely for now b/c the economy is soo bad, I'm scared to get into anything so finite right now.

[shopmysongs]

My son & I have rehabed 3 homes. There is a site to go on for Hud Homes & you can find out everything about them, from the inside out. A lot of people who lose their homes, trash them cuz of the situation. Look in the windows, talk to neighbors & get whatever info you can. Another way to go is look for a house that needs update. My other son just bought a condo that had really bad dog urine all throught the condo & the decor was from the 1970's. We gutted the whole condo & doing the work ourselves he will profit about 30,000. There is a produce called Odorxit. It gets out cat & dog urine completely. It works on wood, concrete & carpet. But I would tear out the carpet. It's an awesome product. Lots of luck to you!

[firespirit]

If you and your hubby are in stable jobs even with the downturn of the economy, now would be a better time to keep looking. The interest rates are going down and if you don't have a pressing need, it's a great time to negotiate with banks and get a low fixed rate mortgage.

[Whitewater]

Now is the ideal time to buy a home, particularly for the first-time homebuyer who hasn't got a lot of money to spend! Interest rates are down, and that's important, because when you get a 30 year fixed rate at 6.0 you can laugh at everybody else when their adjustable rates hit 9 or 10 percent! :) Fixed rate means that no matter what the rates do, yours is fixed at whatever rate your bank locked you in at -- for the entire life of your loan. You can save a heck of a lot of money that way!

As for buying a foreclosed home, you may not have much of a choice if you live in an area like I do. As of Feb 1st, 56% of all homes on the market in my were either forclosures, pre-forclosures, or short sales (which is when people sell their homes because they have a mortage that's higher than what the home is worth, so a foreclosure is imminent -- the home owner can start the short sale process and get away without having a foreclosure on their credit report IF the bank who holds the mortage note agrees to the offered selling price.).

They expect that number to go up substantially, perhaps as high as 75 or 80%. What that means for us is that we will probably just have to accept the fact that most of the homes we look at will be foreclosures, somehow, and to deal with that.

Most foreclosure homes need repair. Plan for that, and it's not just $100 here and there. Generally they're foreclosed because the owners can't afford the payment -- and if they haven't been making their house payments, do you think they're splashing out on expensive home repairs? Um, no. Plan for $3-5K minimum of home repairs that you'll have to do. And speaking of which, a lot of foreclosed homes are sold AS-IS, which means that the bank doesn't know about the condition of the property and doesn't really care about it either, which means that the house can and will deteriorate the longer it's vacant and just sitting around. The bank has no obligation to fix anything, and you probably won't get them to agree to do it, either.

You can get a good deal with a foreclosure if the bank's listing price is under the current tax value of the home, which you can find out either by looking the home up online at your county records office website, or on a couple websites out there, like Zillow.com. For example, the most recent home we put an offer on was listed at $99,000 even though the most recent tax value was $159,000. Great deal, right? Well, yeah, but it needed a new furnace ($12,000) and new windows and paint ($5,000) and the main bathroom had mold in the walls because there wasn't an exhaust fan ($6000) PLUS the owner had quite obviously refinanced in order to do home repairs BUT it was equally obvious he didn't know the first thing about doing it (and had run out of money halfway through), so we would have had to put in new carpet upstairs ($3000) OR put in new hardwood floors to match the downstairs ($8000), and we would have had to finish the work he started in the kitchen ($2000) PLUS we would have had to buy ALL NEW APPLIANCES ($2500 for everything because there's a factory outlet near here) because appliances are considered personal property and are generally not included in the sale. In this case, there *was* a fridge left, but it was GROSS inside and it needed to be thrown away. Oh, and I almost forgot the $5000 it would have taken to replace the bad gutters with new ones.

So. $99,000 for the house PLUS $32,500 minimum for necessary repairs (and let's not even start talking about the $2000 to fence the property or the $5000 for the garage, not to mention the probably $1000 in yard and garden stuff that we don't have and would have needed right away) and you get a grand total of $137,400. Add on the exterior extras and you get $155,400 . .. .. .when the tax value originally was $159,000.

So, maybe not such a good deal after all.

My advice to you would be to get a savvy real estate agent who's a quick learner and A) talk to them about what you want, what you would like, and what you absolutely must have in a house (for us, we need a backyard for the dog, preferably fenced, we need functional plumbing and heat, we need good 'bones', roof, siding etc and we need hardwood floors -- everything else is a want). Then, B) get your real estate agent to learn about foreclosures AND have them scope out the pre-foreclosure 'motivated sellers' in your area. Those are the people that are still living in their home, want to sell it before the bank's deadline for reposession, and will probably take any offer, even if it is a little bit low, because they're desperate to sell and close before the bank swoops down.

Don't mess about with the actual homes that have gone through the entire process and are now sitting vacant if you can help it. Banks aren't in the real estate business and they traditionally have no motivation to sell quickly, or at a reasonable price. Depending on what the real estate market is like in your area, though, and if you're dealing with a local bank (we weren't, they were located across the continent!) , the banks may now start to wake up and realize that if they have 500 properties on their books, whereas last year at this time they had 50, that they might want to change the way they cope a little bit.

Expect them to take FOREVER in getting back to you. It's not uncommon around here for short sales to take two to three months from the buyer putting in their offer to the bank *accepting* their offer. Not closing and moving in. Just accepting the offer. And it could take another month or more to get to closing . . . .We were very surprised when our selling bank got back to us within a week. That's lightening speed!

Banks do everything slowly, and they're not interested really in negotiating because they have a gazillion properties on their books. They have no motivation to sell. Expect it to take time.


Anyway, that's what I learned about foreclosures from personal experience. It doubles the frustration and it triples the waiting around time. Do your homework, take a first-time homebuyer's class, research online as much as you can -- there's some fantastic information out there. Above all, don't go into it naiive and clueless. Banks will take every advantage they can (like they did to us). We got smart in a hurry and managed not to lose our shirts, but I would hate for somebody else to get burned.


Whitewater

[Diamend]

OMg thank you soo much!! That was soo informational and helpful!!! I'm definitely learning!! I didn't know that you could have a realtor help find and negotiate with foreclosures or pre-forclosures.... thanks!!!

[Whitewater]

You're welcome -- and if your state laws allow for it, get yourselves a "buyer's agent" to help you find your home. Make sure the agent knows about foreclosures, because when you get a 'buyer's agent' it's kind of like a SuperRealtor, but they only work for YOU -- and they make you sign papers to that effect. In essence, you're marrying the agent for as long as it takes to find you a property. They'll work entirely on your behalf, they're obligated to give you the benefit of their experience and not to snow you, and believe you me, you will want somebody in your corner on your behalf during ANY real estate transaction, but especially a foreclosure.

good luck, and let us know what you end up doing!

Whitewater

[shopmysongs]

Whitewater is right on the money. My son is a realtor & it's really hard to find one that will dedicate everything to you as their client. When my son is closing a deal he works with other realtors & he is amazed at how lazy some are. They don't return phone calls, they don't get contracts back on time & some just don't go out of their way for you. It would be nice to find one that someone has worked with & was real happy with. Recommendations are the best kind. When you call them for advice they should return calls within that day. If you find a good realtor they are really hard working people. My son has showed houses on holidays, weekends & late at night. That's dedication & that's what your looking for. Good luck!