Different ways to purchase a home - help answer some questions, please! Foreclosures?

[sheryl]

We've been in our house a looooong time and have been planning to move in to another house.  It will be new for us but not new construction.

 

We are working with a real estate agent and in 3 years nothing has really jumped out.  Either I like the house and it's in a not-so-great area of town or a house is for sale in a great location which is a fixer upper.   Moving has not been a priority as we've had many challenges in the last 2 years.  But, the emails from our real estate agent still come.  She took our preferences down and based on those she was able to computer generate daily emails.

 

We have increased our buying price twice.  I see a trend that houses are inching upward.  Am I wrong on this? Or, maybe it's based on state, etc.

 

So, there isn't much inventory in our price range.  I found a great location but we'd have to dump a lot of money in to it and it is already nearing the top of our budget so that would put it way over as it seems to be a major rehaul.

 

To get in one of the areas we like with a decent house, I'm thinking we need to broaden to consider foreclosures. 

 

Not interested in auction.  I'm wanting to jump start the move.  It may not happened with our agent so I'm trying to be creative here to help us move.

 

What are pros and cons to foreclosures?  Would you recommend them?  Why?  Is there anything we need to know before deciding to go this route.  

 

We've had belongings in storage for a year now and that's money spent.  We'd like to move. 

 

 

[SusanneA]

Sheryl,

 

Those are really hard questions to answer because it is so different from state to state. We just bought a foreclosure in NH last fall and it was fairly painless but it still took longer than dealing with a private owner because every piece of paper had to go before the court (there was also a bankruptcy involved ) and wait to come up on the docket before we could get any approvals. It took almost 3 months from original offer to closing. We sold our house in MA and the MA realtor said stay away from foreclosures in that state because they can take years to move through the system.

 

Remember, in a foreclosure some big corporate (and possibly out-of-state) bank owns the house and they don't have a lot of incentive to move the thing. Our realtor told us about dozens of homes that foreclosed 2 or 3 years ago and the bank still hasn't gotten around to even listing them for sale. Your offer could sit on someone's desk in a big big pile of other foreclosures and offers and wait until the bank needs to move some losses off their books.

 

Foreclosures have a lot of risks involved because they are "as is." You often can't even get inside to look at them.

 

I also heard horror stories from our realtor about owners who refuse to move out of their foreclosed home so the buyer ends up getting the police involved to enforce an eviction order. People who go into foreclosure obviously can't afford the mortgage so they often also can't afford repairs.The house could need significant maintance. Then there are the angry ex-owners who do things like pour concrete down the toilet before they leave or rip out the flooring just to be spiteful.

 

All in all, foreclosures really work best for contractors who want to buy dirt cheap, pay cash, do major renovations, and flip the house for a profit.

 

Can you ask around for an agent who specializes in foreclosures? That might be your best source of  information for your specific location.

 

 

[sheryl]

Thanks, Susanne!  I appreciate your insight in to this and the Vitamix question as well!  :)   Welcome to WTM!

 

You bring up a good point about finding someone/an agent who specializes in foreclosures.  I won't buy a house I can not "walk through" (auction).  Also, I will ask for an inspection. 

 

Appreciate your responses!
 

[Pawz4me]

The lady who does my hair recently bought a foreclosure.  They'd been looking for a year or so before they found it.  It was owned by a local bank that had come in and fixed/updated a lot of stuff.  I know it had new flooring, windows and roof.  Maybe other major things were replaced, but I'm not sure.  She said it was no more difficult than buying from a private seller.  Their agent dealt with the bank's agent just like any other purchase.

[Mama Geek]

Our house was a foreclosure a few years ago.  Where we are the foreclosures were listed on the MLS and the banks were ready to sell.  We had cash so it was fairly easy.  I am sure how hard it is probably varies by state.  My dh and FIL are both really good at assessing what work needs done and estimating costs and then we also had an inspection done.  We also did most of our own work with the help of a family member that was out of work at the time.

 

We were able to walk through the house and have inspections done.  Our realtor had lots of experience with foreclosures by the time we bought our house.

[Desert Strawberry]

The house we are buying is a foreclosure that went to auction. My cousin bough it and we are buying it from him. Ideally, we would have bought it ourselves and it would be ours already, but I was slow on the auction listing and missed it. 
It's a gamble for sure. We will have to put a lot of work into it. We still don't know how much. We don't know if the AC works. That could be a big repair. 
But here's the thing. We are paying 1/3 the value of the house. The day we take possession, we will have tripled our investment. We made sure we budgeted a LOT for repairs. This is a nice area, and a nice house. There's NO WAY we could have bought this house after the renovations were finished. 
The nice thing about auction is that the house transfers immediately. If you do it, you can move in that day. 

[TammyS]

It really depends on where you are located.  In our area, foreclosures are hopeless for regular buyers.  There is 1 agent who has specialized in them and essentially "gets" all the foreclosure listings, and he won't even present your offer to the bank unless it's" cash, no inspection, 30 day close.  Basically, he just sells all the foreclosures to landlords.  It's really unfortunate because it's increased our already horrific rental market (which is full of crummy houses that rent for 2x what a reasonable mortgage would be for the same house).  I'm also a little bitter because I feel like this person could do a LOT of good for the working classes if he gave them a reasonable shot at these houses (I know he's not obligated, but it still bothers me).

 

So, yeah, find an agent that specializes in foreclosures and ask them to give you the 411 on the foreclosure market in your area.

 

 

[need2read]

My family contracts to service foreclosures, so here is my advice:

A lot of foreclosures need work and are not mortgageable. People who lose their homes often strip the place before they move out and the banks are not quick to get in there and winterize to prevent freeze damage or make sure there is a sump pump in the basement of water tends to seep in. Also, they close them up tight so newer homes can be quite moldy.

 

If none of that scares you (we bought a foreclosure and repaired it and are considering doing it again for our next house) then expect a lot of time to pass between signing a contract and the actual closing. The banks don't hurry; it can be 3-6 months by the time you close on the house.

 

You can get an awesome deal on a house you maybe wouldn't be able to afford normally if you consider foreclosures. If you don't mind maybe doing some work it's definitely worth considering.

 

 

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[shawthorne44]

Have you already looked at the HUD houses in your area?  I've bought two houses that way, and I prefer it over buying from a owner.  WIth a HUD, once yoiur offer is accepted, that is it.  There isn't an owner to have second thoughts, to delay the closing, to not move out when they agreed. 

 

I notice you don't like the idea of a fixer-upper.  Some of them can be money pits, Some of them can be incredible bargains.  My first house was a fixer-upper and I don't regret it one second.  Structurally it was fine. As well as the heat and A/C.  Electrical and plumbing within the walls was fine.    It needed a new roof, new paint, new windows, new flooring, new breaker box.  The fireplace needed work, There was a giant hole in the backyard, and all landscaping except for two trees was dead.  Then I painted the walls the colors I liked.     I bought flooring I liked.  I am still in love with the Karastan I put in the bedrooms.  I picked out a lovely roof with a little bit of red.  Oh, and I replaced the kitchen cabinets and appliances.  I'm still in love with the cabinets too.  The house's purchase price in '97 was its new price in '76.  I love the windows too, and they are way nicer than someone else would have bought. 

 

corrected: the house had been built in '76 not '66. 

Edited November 19, 2015 by shawthorne44

[Miss Marple]

I have purchased 2 homes that were in foreclosure.  They are being used as rentals.  The best advice I can give is to pay for a home inspection from a well known inspection company.  The one we use gives us a 90 day warranty.  If they say the water heater is fine and it goes out within that 90 days, they pay for the new one.  Sometimes it is frustrating to work with the banks holding the foreclosure, but you just have to deal with it.  Example:  we made an offer with closing to be at date X/Y/Z.  The bank had several things that they had to remedy - which came to light during the process - and asked that we move the date back about a week.  That was fine, but it really hacked me off when they added the clause that we would pay a penalty of $X for every day we delayed closure after that.  LOL!  We weren't the ones delaying closure, but we couldn't ask for a penalty from them.  In the end they delayed closure 3 times  :laugh:

 

I'm currently in negotiation for a home in foreclosure on a "short sale".  That's even more frustrating.  However, we weren't really looking for another rental but this one happened to pop up and our offer is about 40,000 under market.  We made the offer the first part of September and they are still deciding...we get weekly updates...the last one said we were in good position to be accepted.  We should know something by the end of next week hopefully.  The date we submitted for closure is 12/1.  My guess is that won't happen. This home has been on the market for almost 2 years.  The last offer was made July 2014 and it was finally refused in December 2014.  So "short sale" homes can hold you up, but you often get a great condition home for a good deal...if you are willing to deal with the hassle of the banks.

 

The homes I purchase must fit certain criteria...so we have very little renovating to do before putting them up for rent.  If you are willing to put some time and effort into a home (painting, flooring, sheet rock repair, etc.) you can get some great deals with foreclosures.  I would encourage you to add foreclosures to your list.

[PeachyDoodle]

Have you already looked at the HUD houses in your area?  I've bought two houses that way, and I prefer it over buying from a owner.  WIth a HUD, once yoiur offer is accepted, that is it.  There isn't an owner to have second thoughts, to delay the closing, to not move out when they agreed. 

 

I notice you don't like the idea of a fixer-upper.  Some of them can be money pits, Some of them can be incredible bargains.  My first house was a fixer-upper and I don't regret it one second.  Structurally it was fine. As well as the heat and A/C.  Electrical and plumbing within the walls was fine.    It needed a new roof, new paint, new windows, new flooring, new breaker box.  The fireplace needed work, There was a giant hole in the backyard, and all landscaping except for two trees was dead.  Then I painted the walls the colors I liked.     I bought flooring I liked.  I am still in love with the Karastan I put in the bedrooms.  I picked out a lovely roof with a little bit of red.  Oh, and I replaced the kitchen cabinets and appliances.  I'm still in love with the cabinets too.  The house's purchase price in '97 was its new price in '76.  I love the windows too, and they are way nicer than someone else would have bought. 

 

corrected: the house had been built in '76 not '66. 

 

Agree. Our first home was also a HUD foreclosure. Really not any different than buying from a private seller, and most if not all of them qualify for government-backed financing, especially if you are going to live in the home yourself for a certain number of years, so that helps. We were able to finance at 100% and still take out a home equity line on the instant equity to renovate.

 

You definitely want to look for something that is structurally sound and just needs cosmetic work. IIRC, you need an agent to submit your bid, so find one who's familiar with the process.

 

You can look online at www.hud.gov at the ones currently for sale in your area. I do it periodically just for fun. :)

 

[Carol in Cal.]

Two factors I have not heard anyone mention here yet:

 

One is that sometimes you can ask the bank to carry your mortgage at terms slightly more favorable than market rates and fees.  I've seen that work once or twice for people I know.

 

Another is that if there is a second mortgage holder they can gum up the works considerably.  I know someone who bought a house like that, and at the last minute, literally the last week of escrow, the second mortgage holder balked at accepting whatever settlement had been offered, and the buyer had to ante up 10% more to the second holder or walk away from the deal.  You have to be ready to roll with the punches a little more with foreclosures or short sales because of that kind of random thing.

[sheryl]

talk to me then about financing.   a friend today with whom I had this topic of conversation suggested a bridge loan. 

[need2read]

If you own the house you are in now, is there enough equity to borrow against it? Then when you have done the necessary repairs on the new house so that it is mortgageable you can take out a loan against that one and pay off the other loan.

 

 

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[Scarlett]

We bought a foreclosure at an on line auction. We were able to see the inside first. Closing time was very short....3 weeks I think.

 

It takes a lot of work but can really pay off.

[sheryl]

If you own the house you are in now, is there enough equity to borrow against it? Then when you have done the necessary repairs on the new house so that it is mortgageable you can take out a loan against that one and pay off the other loan.

 

 

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Thanks!  I appreciate it!

 

 

 

We bought a foreclosure at an on line auction. We were able to see the inside first. Closing time was very short....3 weeks I think.

 

It takes a lot of work but can really pay off.

 

Thanks, Scarlett!  I really need to understand more how all of this happens.  We've bought 1 home.  We've been in it 25 years and have never sold so this will be a new experience for us1

[Scarlett]

Thanks! I appreciate it!

 

 

 

 

Thanks, Scarlett! I really need to understand more how all of this happens. We've bought 1 home. We've been in it 25 years and have never sold so this will be a new experience for us1

It must really vary from state to state. Probably from region to region within states too. This is a rural area..we found it on realtor.com....Dh drove by it....ther was a for sale sign in the yard...the house was listed with a realtor in the city....that realtor would not even return our call. We found a local realtor who was happy to show it to us and to tell is what she knew of the history.

 

We decided that evening to make an offer....but when we got back to the office it was no longer in her system.....she finally got hold of someone who told her it had gone to action and had to be purchased on line. So I went home, signed up, read the fine print and opened a bid when it came up.

 

Since then, my parents and several friends have been looking or bought houses here in this area. Several that had for sale signs in the yard from a realtor and were on realtor.com turned out to be auction houses. And several, including ours, have gone up and down many times because the minimum is not met.

 

That being said there is also a list of houses that are on a different site just for foreclosures. I think is a process and depending where any particular house falls in the process the buyer may have an easier or more difficult time. It does take a LONG time for a house to get through foreclosure and be for sale....but once it gets to that point the bank is ready to deal.

[sheryl]

Thanks, Scarlett!  Will buying a foreclosure accomplish what I'm seeking?  A house that is sold for less than if it was "not" in foreclosure? 

[Scarlett]

Thanks, Scarlett!  Will buying a foreclosure accomplish what I'm seeking?  A house that is sold for less than if it was "not" in foreclosure? 

 

 

I would look, not specifically for a foreclosure...because they can have a huge set of unique problems....people who get foreclosed on can be very vindictive...Our house was stripped.  No bathroom mirrors...no light fixtures, the mantle was taken, the fireplace piping was taken, the rod iron fence around the pool was taken, the front porch was taken....just crazy stuff.  

 

But look for a fixer.  Houses where people have tried to fix it up but couldn't pull it off and just now want out.  People don't like to buy those houses.  And they are good houses to low ball and maybe walk away with a steal.   

[flyingiguana]

We bought a foreclosure that was owned by the bank.  The eviction had happened quite some time ago.  The major issues were that the house had sat empty so long that some maintenance issues got way out of hand.  But we knew what they were and about how much it was going to cost to fix them.

 

Then we looked at some other foreclosures and decided against them because it seemed there were, um, issues. In one, although the eviction had already happened, someone was still living there.  Just seemed like too much of a mess to get involved in.  Each foreclosure may be unique.  There are a lot of good ones out there, at bargain prices.  Others that *aren't* at bargain prices.  And some you really just do not want to deal with.

 

You might also look at short sales.  They can be real bargains.  (Although not always)  The problem is you have to sit and wait for the bank to decide whether it's going to take the offer.  It can take months.  However, if you have a place to live and don't need something right away, this might work out well.

 

My experience with realtors is that they don't like to work with foreclosures and short sales.  They'll steer you away because they *think* it's going to be a scary mess.  Most of the time it isn't.  I've also been told by loan people that a lot of foreclosures turn into a nasty mess because the realtors get all bent out of shape about things and make it all unnecessarily complicated.

 

You don't need to depend on your realtor's emails for houses to look at.  There are other ones out there.  Both houses we bought recently were things I found -- either by happening to drive by or by finding it on the internet.

[Jean in Newcastle]

Thanks, Scarlett!  Will buying a foreclosure accomplish what I'm seeking?  A house that is sold for less than if it was "not" in foreclosure? 

We bought our house for very cheap because it was a quick sale (as is) from a family wanting to sell before the bank took it back.  So pre-foreclosure.  We had to make a quick decision though.  It was such a good deal (half of what it should have been listed at) that there was a lot of interest.  We knew what we wanted.  We knew houses.  So five minutes after walking through we agreed to pay the asking price, locking it in.  Ten minutes later others were trying to do the same but we had beat them to it.  Our agreement still included an inspection so we could have backed out if the inspection showed anything too bad.  There were issues but none that we didn't feel like we could handle.  

[Desert Strawberry]

A lot of the houses we have seen-including the one we're buying-are unfinished flips. So there is often some demo, a little renovation, and some still being too be finished. 

In our house, they took out the carpets and flooring in the kitchen, put in New cabinets, removed a bathroom sink, took down an old medicine cabinet, but left it in the bedroom, removed all but one lighting fixture, rewired the outlets wrong, and removed all of the appliances. D is over there now unscrewing all the outlets, changing all the locks, and mending the French doors. 

For us, it works out ok. They did some of the work for us.

And yes, much cheaper. You might have to make up some of the difference in repairs, but hopefully not all of it. I don't think we'll put anything close to $40k into ours, even with the improvements we plan to make. 

[Scarlett]

We bought a foreclosure that was owned by the bank. The eviction had happened quite some time ago. The major issues were that the house had sat empty so long that some maintenance issues got way out of hand. But we knew what they were and about how much it was going to cost to fix them.

 

Then we looked at some other foreclosures and decided against them because it seemed there were, um, issues. In one, although the eviction had already happened, someone was still living there. Just seemed like too much of a mess to get involved in. Each foreclosure may be unique. There are a lot of good ones out there, at bargain prices. Others that *aren't* at bargain prices. And some you really just do not want to deal with.

 

You might also look at short sales. They can be real bargains. (Although not always) The problem is you have to sit and wait for the bank to decide whether it's going to take the offer. It can take months. However, if you have a place to live and don't need something right away, this might work out well.

 

My experience with realtors is that they don't like to work with foreclosures and short sales. They'll steer you away because they *think* it's going to be a scary mess. Most of the time it isn't. I've also been told by loan people that a lot of foreclosures turn into a nasty mess because the realtors get all bent out of shape about things and make it all unnecessarily complicated.

 

You don't need to depend on your realtor's emails for houses to look at. There are other ones out there. Both houses we bought recently were things I found -- either by happening to drive by or by finding it on the internet.

This. My experience has been that realtors don't want the hassle. In fact, the realtor who first showed us this house made like $200 on it. She saw me in town one day and said, laughingly, " hey we sold a house the other day and made less commission than on yours. ". I laughed. She shrugged and said, " sometimes you make money, sometimes you build goodwill. " as a matter of fact I steered friends toward her ( selling and buying) and my parents ( buying).

 

Find a realtor who will look for what you want.

[TranquilMind]

We've been in our house a looooong time and have been planning to move in to another house.  It will be new for us but not new construction.

 

We are working with a real estate agent and in 3 years nothing has really jumped out.  Either I like the house and it's in a not-so-great area of town or a house is for sale in a great location which is a fixer upper.   Moving has not been a priority as we've had many challenges in the last 2 years.  But, the emails from our real estate agent still come.  She took our preferences down and based on those she was able to computer generate daily emails.

 

We have increased our buying price twice.  I see a trend that houses are inching upward.  Am I wrong on this? Or, maybe it's based on state, etc.

 

So, there isn't much inventory in our price range.  I found a great location but we'd have to dump a lot of money in to it and it is already nearing the top of our budget so that would put it way over as it seems to be a major rehaul.

 

To get in one of the areas we like with a decent house, I'm thinking we need to broaden to consider foreclosures. 

 

Not interested in auction.  I'm wanting to jump start the move.  It may not happened with our agent so I'm trying to be creative here to help us move.

 

What are pros and cons to foreclosures?  Would you recommend them?  Why?  Is there anything we need to know before deciding to go this route.  

 

We've had belongings in storage for a year now and that's money spent.  We'd like to move. 

My preference is estate auctions.  An elderly person has either died or gone into another place closer to the kids, and they need to liquidate the house.  This is fast and easy and you know you don't overpay.  You still have 45 days to close and can get a mortgage, etc.  You should be knowledgeable about houses though.  While you can inspect, it isn't an out or a negotiating point like it is with Realtor sales.  But you still pay far less and no agent is taking money off the top (though there will be a fee for the auctioneer, typically a couple of thousand).    The house is generally in very good, though dated condition.  I just bought one that was completely updated...except cosmetically.  New HVAC, water heater, french drain system, etc.   

 

I'm not sure why you are not interested in auctions, but it is my favorite way to buy.  Foreclosures would be far down on the list for me, as there is typically some damage and even stripping of mechanical systems and fixtures. 

 

Real estate agents are on the bottom of my list, though I might bring one in after I find the house. 

 

Yes, prices are rising.  I just set a new record for the neighborhood (for size) on the last house I sold. 

[TranquilMind]

We bought our house for very cheap because it was a quick sale (as is) from a family wanting to sell before the bank took it back.  So pre-foreclosure.  We had to make a quick decision though.  It was such a good deal (half of what it should have been listed at) that there was a lot of interest.  We knew what we wanted.  We knew houses.  So five minutes after walking through we agreed to pay the asking price, locking it in.  Ten minutes later others were trying to do the same but we had beat them to it.  Our agreement still included an inspection so we could have backed out if the inspection showed anything too bad.  There were issues but none that we didn't feel like we could handle.  

That's awesome, Jean. 

[TranquilMind]

I would look, not specifically for a foreclosure...because they can have a huge set of unique problems....people who get foreclosed on can be very vindictive...Our house was stripped.  No bathroom mirrors...no light fixtures, the mantle was taken, the fireplace piping was taken, the rod iron fence around the pool was taken, the front porch was taken....just crazy stuff.  

 

But look for a fixer.  Houses where people have tried to fix it up but couldn't pull it off and just now want out.  People don't like to buy those houses.  And they are good houses to low ball and maybe walk away with a steal.   

This!  Though I would alter the last sentence as I prefer houses that no one has muddled up yet.  Dated and in original, good condition, though it is true that a cosmetic mess or a missing fixture can really weed out buyers. 

[Scarlett]

This! Though I would alter the last sentence as I prefer houses that no one has muddled up yet. Dated and in original, good condition, though it is true that a cosmetic mess or a missing fixture can really weed out buyers.

I agree. Untouched is better than half done inferior work.

[Tsuga]

I have purchased 2 homes that were in foreclosure.  They are being used as rentals.  The best advice I can give is to pay for a home inspection from a well known inspection company.  The one we use gives us a 90 day warranty.  If they say the water heater is fine and it goes out within that 90 days, they pay for the new one.  Sometimes it is frustrating to work with the banks holding the foreclosure, but you just have to deal with it.  Example:  we made an offer with closing to be at date X/Y/Z.  The bank had several things that they had to remedy - which came to light during the process - and asked that we move the date back about a week.  That was fine, but it really hacked me off when they added the clause that we would pay a penalty of $X for every day we delayed closure after that.  LOL!  We weren't the ones delaying closure, but we couldn't ask for a penalty from them.  In the end they delayed closure 3 times  :laugh:

 

I'm currently in negotiation for a home in foreclosure on a "short sale".  That's even more frustrating.  However, we weren't really looking for another rental but this one happened to pop up and our offer is about 40,000 under market.  We made the offer the first part of September and they are still deciding...we get weekly updates...the last one said we were in good position to be accepted.  We should know something by the end of next week hopefully.  The date we submitted for closure is 12/1.  My guess is that won't happen. This home has been on the market for almost 2 years.  The last offer was made July 2014 and it was finally refused in December 2014.  So "short sale" homes can hold you up, but you often get a great condition home for a good deal...if you are willing to deal with the hassle of the banks.

 

The homes I purchase must fit certain criteria...so we have very little renovating to do before putting them up for rent.  If you are willing to put some time and effort into a home (painting, flooring, sheet rock repair, etc.) you can get some great deals with foreclosures.  I would encourage you to add foreclosures to your list.

 

I have a question for you. I'm a first-time home buyer here in the US and there is no way that we can pay cash for a house in our area, or anywhere anyone would want to live, really.

 

How can people like us buy a foreclosure? Is there something like a foreclosure which doesn't require cash on hand? I should mention that cash is really, truly not an option--we just don't have $400,000 + to spend on a home right now, though we did pay off college (mostly) and our kids' pre-school. I swear we are not lazy--we would love to save but that isn't a possibility for us right now, it's all we can do to scrape up a down payment for 10%.

 

Or how could we do an estate auction without cash? Is there some way regular people can go about this?

[Scarlett]

I am no expert but I believe you can have a letter of credit from the bank along with a deposit that allows you to bid.

[Catwoman]

I have a question for you. I'm a first-time home buyer here in the US and there is no way that we can pay cash for a house in our area, or anywhere anyone would want to live, really.

 

How can people like us buy a foreclosure? Is there something like a foreclosure which doesn't require cash on hand? I should mention that cash is really, truly not an option--we just don't have $400,000 + to spend on a home right now, though we did pay off college (mostly) and our kids' pre-school. I swear we are not lazy--we would love to save but that isn't a possibility for us right now, it's all we can do to scrape up a down payment for 10%.

 

Or how could we do an estate auction without cash? Is there some way regular people can go about this?

I don't know how the auctions work, but I wanted to say that a 10% downpayment in an expensive area is a LOT of money, so please don't think anyone would believe you should be able to pay for a pricey house with cash!