Buying a foreclosure home

[duckens]

Loverboy and I are looking for a house to buy, and one house in our price range is a former foreclosure home, currently owned by Wells Fargo.

 

I know that there are risks with purchasing a foreclosure home. For example, there is no seller's disclosure statement. One purchases a home "as is."

 

We have close friends who bought a foreclosure home, and their situation turned out well for them.

 

Likewise, I am skeptical of the value of the seller's disclosure statement in traditional sales. "No, there's no aspestos in the house to our knowledge" (even though it is visibly and openly present in the basement). "No, there is no lead paint in the house to our knowledge" (even though the paint on the porch has the characteristic "cracking" of lead paint.)

 

What I need from the hive is stories of yourselves and your friends who have bought foreclosure homes, and did it turn out well or not?

 

FWIW, I'm voting for the square frame white farmhouse on the hill near the downtown (not foreclosure); and I struggle with benefiting from someone else's misfortune if we choose to bid on the foreclosure home.

 

ETA: Thanks in advance!!!

Edited September 4, 2011 by duckens

[Amy in NH]

We bought one from Freddie Mac just before the foreclosure boom started. We bought it as is, but also knowing that it needs a lot of work. We were willing to buy it because we wanted it bad enough to be willing to put up with unforseen problems - like a water supply issue. It is really the perfect property for our family, and I wouldn't change it if I had it to do over again.

[duckens]

What was the water supply issue? Not enough hot water? Or a well that runs dry and you need to wait for the well to re-fill. (My parent's acreage has run like this for years).

[elegantlion]

Our home was a foreclosure. In our case, dh is a contractor, but he didn't see the house until we had a contract. It's a small cottage bungalow and the price was low enough to compensate for what had to be remodeled.

 

Our biggest issue was in the getting an accepted contract, we got into a bidding war, initially lost to another party. About two weeks later they backed out and we submitted a new offer.

 

IMO one of the biggest things is knowing what you're getting into. Even if an inspection turns up an issue banks won't normally fix issue, but it could give you some room to negotiate.

 

I don't have an issue with "benefiting" from someones misfortune. Houses are built to be lived in, not left sitting empty. We love our home, it's cozy and perfect for us. It's been almost a year since we first looked at it. It looked sad at that point, seriously needed some work, but now it is fulfilling its purpose. Kind of sentimental, but I hate seeing empty homes. We have quite a few in our town and it makes me sad for the families that used to live there, and for the house that is only deteriorating.

[ClassicCole]

I recently purchased a foreclosed home. It was the perfect home for our family. I did request a 10 day inspection period. It was left vacant during the middle of the winter. Had concerns about the plumbing. Well there was 2 pipes which had to be replaced and a toilet. Really blessed and not that expensive of a repair.

 

It did make me sad for the family who had worked so hard on the home. I can see they loved it dearly. I truly pray they find a new home to meet their needs.

[GoVanGogh]

I don't have an issue with "benefiting" from someones misfortune. Houses are built to be lived in, not left sitting empty. We love our home, it's cozy and perfect for us. It's been almost a year since we first looked at it. It looked sad at that point, seriously needed some work, but now it is fulfilling its purpose. Kind of sentimental, but I hate seeing empty homes. We have quite a few in our town and it makes me sad for the families that used to live there, and for the house that is only deteriorating.

:iagree:

Also, you really have no idea *why* a house was in foreclosure. Everyone seems to automatically think about some poor homeowner, losing their dream home to the big, bad bank. That is not always the case.

The house next to us was in foreclosure for two years. It was used as a drug house for one year, until a teen died of an overdose on the property. It then stood vacant for a year. I cannot tell you how excited our entire neighborhood was when someone bought it and started fixing it up!

I knew the former homeowners for 13 years and don't have one bit of sympathy for them over the fact that they lost their home. I'm normally a very empathetic person, but - if you knew these people and what they did to this neighborhood. :glare:

The home needed major work - new roof, new drywall, foundation repaired, water pipe break under the foundation fixed, trees cleaned up, new doors and windows, all new flooring, new cabinets. He basically gutted the house and started over.

But he bought a junked house for a 1/4 of its value and did all the work himself. This is actually one of the 'best' locations in this area - affluent community, desired school district, high property values. He now has the house on the market and expects to make a six-figure profit.

That is 'worse case foreclosure scenario' to lovely home, in less than a year's time.

[athena1277]

Don't feel bad about buying a foreclosure. We moved out of state and could not sell or rent our house after the market turned bad, so it finally foreclosed when we could no longer afford to pay for 2 homes. It does stink that we will not be able to buy another home for a while, but we were not kicked out with nowhere to go.

[AvasMom]

We bought a foreclosure and it turned out great. I agree with the PP. There is an entirely different market of foreclosure homes today because of the recession. It's a lot more likely to have been owned by victims of the recession than deadbeats who neglected it.

[Amy in NH]

What was the water supply issue? Not enough hot water? Or a well that runs dry and you need to wait for the well to re-fill. (My parent's acreage has run like this for years).

 

The well is actually on a spring. The overflow from our well flows out of a rusty old pipe on the side of the road where people from states around stop to fill up their water jugs. It never runs out.

 

The problem is multifaceted. The spring/wellhead itself is 1/8 mile away on the other side of a major interstate highway from our house. The feed line has to come up a small incline on its way to our house. The piping was last replaced during the 1960s - it is some sort of plastic or vinyl. The piping coming into the foundation is too small to supply the house, so we have a large pressure tank which takes a while to refill when it gets too low. We can't run too many showers back to back, or flush toilets or run taps when someone is in the shower; the shower just stops - soapy or not, and there's no more water for sometimes 10-15 minutes while we wait for the tank to fill again.

 

The highway department repaved the highway two summers ago. While clearing the sides of the highway of brush they hit a shutoff valve for our waterline that is next to the road. We ended up with dirt/sand in our line for months, clogging up sink tap filter screens and my washer. Sand would pour out with the water into the tub when I tried to give the kids a bath. I started to file a claim on our homeowner's insurance, took multiple pictures of the damaged pipe, had meetings with the highway department. They are stating that they didn't/couldn't have done it, and even if they did do it the highway department has a 30' right of way which includes our deeded well and the shutoff valve. The whole thing is on a tight corner for a 50 mile/hour road, and would require heavy equipment and traffic control. The well people told me that if we start digging the supply line could crumble because of the age of the pipe. I dropped it because I am afraid that the insurance will pay to fix the valve but then something major will happen to the supply line and we'll end up with no water at all. A new well will cost $10,000 to dig on this side of the highway. After a few months the dirt finished flushing out of the line, so now it's just the supply issue again.

Edited September 4, 2011 by Amy in NH

[Impish]

We're looking to buy our first home...hopefully sooner than later.

 

For me, personally, I steer clear of foreclosures. Its the whole, 'as is, where is' issue.

 

Buying a home is just such a huge investment for us, and Wolf doesn't have the experience or tools to take on major renos. We don't have the available funds if there's something structurally wrong, or if the electrical/plumbing needed to be ripped out and redone.

 

We've talked about it at length, b/c it is so much cheaper, but are really afraid we'd be stuck in a 'Money Pit' situation.

[Amy in NH]

Our biggest issue was in the getting an accepted contract

 

 

 

We had this problem too.

 

I have to admit that I fought hard to buy this house.

 

We ended up bidding the asking price. Someone else made an offer as well. I got lucky and ended up speaking with the VP at Freddie Mac who was in charge of the decision. He advised me that our offer already looked better (the other parties were asking for lots of things we weren't), but to show we were serious we might want to increase our offer by $100 to round it out (ie 149,900 vs 150,000). The asking price was really our price limit, but we bumped the offer by $100 to show we wanted it, and we got it. Then there was a long process of making sure the bank wasn't letting the house go for far below market value. Because we were in danger of losing some homebuyer grants if the bank took too long, I wrote letters to the Board of Directors at Freddie Mac and got the thing pushed through in the nick of time. It probably took 6 weeks from our offer to get the signed contract out of the bank.

[4everHis]

Make sure you have an attorney look over your closing papers EVEN if it means you can sign on the dotted line on closing date. Friends are having to deal with something that didn't show up in the closing papers that should have(deeds & restrictions) the foreclosing bank attorney totally 'skimmed' by the only piece of information that might have brought that to someones attention. Take the time to have someone knowledgeable look at the things that could be costly to fix in an 'as is' situation. Broken plumbing, roof, heat source, well, the big stuff. I think it's a great way to get a home you just need to do your homework.

[Kari C in SC]

We have bought 2 foreclosures and are in the process of buying a shortsale.

 

Our first purchase is the home we live in. In hindsight - we probably paid more than we had to, but we really wanted the house. It is right next door to my dh's family, perfect size, lot, lake, etc. It was UGLY! Yep - that is probably a big thing about foreclosures - getting past the ugly. The only huge repair it needed was an AC system. It is really common for the copper to be missing from the systems. We did not have a inspection because my dh and friends are handy guys. If they were not - I would hire somebody. The bank will not fix it, but you will know how much you will have to repair and that will help determine what you want to pay. All in all - we put about 10k in to make it home and a bit more to make it exactly what we want.

 

Foreclosure number two is a rental home across the street. Couple got divorced and let the house go. Again - a bit ugly, but not a money pit. We happily bid 8k less than they were asking, then put 8k back in to fix it and now have a great rental income. This house also was missing AC coil. This bidding to closing went really fast. The key has been not asking for a lot of stuff. Buy as is - no help with closing costs - close when it is good for the bank - etc.

 

House number 3 is a shortsale just down the road. We will be renting this out too. We put a bid in 2 weeks ago. The owner accepted the bid right away. There were 2 other offers and our was the least "messy" - not the highest. Now we sit and wait for the bank to accept it. Hopefully, they will. The realtor for that house basically told our realtor what the payoff was. We bid that plus real estate commission. The bank will have to eat their cost of closing costs. This house has been for sale for 8 months and is headed to foreclosure. It is UGLY too. Wallpaper, paint and carpet. Ugh! We seem to specialize in ugly houses.

 

FWIW, if you can look past dealing with slow to move banks, UGLY houses, and a bit of red tape - you can get a great deal with foreclosures. Instead of investing in the stock market for retirement - we are investing in rentals. Right now is a wonderful time to be buying foreclosures and shortsales particularly when you look at how low interest rates are.

[happypamama]

We bought our first house, a foreclosure, almost eleven years ago. Hadn't planned to buy right then, but rentals were expensive and not very nice at all. The house was a cute little place in a pleasant, quiet neighborhood that needed a fair amount of cosmetic repair; the family who had owned it had apparently lost the dad (to death), and the mom and kids had been unable/unwilling to keep it up, and it was eventually foreclosed. It needed all new paint, carpet, flooring, a new thermostat, new appliances, and some other things and was being sold at about 2/3 the market value for identical homes in the neighborhood. Most of it we were able to do ourselves, but we got a good inspection first (and my DH works on buildings so is able to see what needs to be done, as well) and knew there weren't any horrible structural issues or anything. It served us well, and we sold it 2 years later for a profit. Well worth it, financially, and we had no problems with the purchase details either, though ymmv.