Bidding on a foreclosed home

[catgirl]

I've come across a home on a lake that has gone into foreclosure - I was told they will be accepting bids in a couple of weeks. Has anyone done this? Are there any hidden pitfalls to watch for? I've been told by the real estate co that was trying to sell it that $159,000 is owed to the bank. How low would you bid? It looks to be a great shape, I haven't been inside, but have looked through the windows. I would appreciate any input from those of you that may have done this. Thanks!

 

[allyphoe]

The house down the street from my parents sat vacant for a couple years while the owners tried to sell it (for way too much). It always looked great from outside - maintained, landscaped, completely normal. It finally sold a few weeks ago.

There have been construction guys there ever since. They tore out an entire semi-trailer-sized dumpster of drywall / pink insulation, what looked like half the interior doors, and a couple toilets, in addition to taking out and boarding over the kitchen bay window. We're guessing water leaks in the bathrooms + being closed up in the heat = mold necessitating the removal of all porous surfaces.

You never know what you're going to get.

 

[dreamer423]

When you bid on a bank owned home, it's very different. They accept bids and may communicate very little. There is no rule of accepting or rejecting within 24/48 hrs. they take their time, ie weeks. They decide who is the buyer, not the foreclosed owners.

What you decide to bid has factors: how popular this area/house is, how many other 4 closures in area. Whatever you bid, make sure your finances are in line with bid. Bank owned examine offers and $ with a fine tooth com-more than usual. And b/c of what's going on-want to make sure they're not opening their bank up to more $ issues. Have seen many here go for more than asking...

Good luck

 

[Colleen27]

Just know that the bank holds all the cards. It can be a PITA, but it can be worth it too. We've made offers where the bank took weeks to respond, or simply didn't respond to offers it considered too low. There's often no counter or negotiation, which can leave you working blind in terms of how agressive to be in making a second offer.

Also, if it is going to be sold at auction, keep in mind that in most cases the bank has the right to reject the winning bid if it is too low. We had a $2500 deposit tied up for 3 weeks only to have the bank reject our winning offer on one property. It wasn't an issue for us, since that wasn't our first auction and we went in knowing the procedure, but it could be a nasty surprise to a bidder who went in thinking that "auction" means "sold to the highest bidder".

Something else to keep in mind - bank owned properties are generally sold as-is and since the seller never lived in the home, they typically don't have any information to disclose even if they were inclined to do so (which for the most part, they aren't). A complete and detailed inspection is EXTREMELY important in buying a foreclosure, because often there are problems that were not addressed while the previous owner was struggling financially, and sometimes the companies the banks hire to handle clean out are also instructed to make surface fixes to minimize the appearance of any defects.

We've purchased two foreclosures, one this year and one in 2005, and are watching the market for the right opportunity to buy a third. It can absolutely be an excellent way to afford more house than you might be able to otherwise, in the right market, but it is kind of like eBay - you have to know how high you're willing to go and have the self-discipline to stick to that number rather than getting caught up in the competitiveness of bidding.

 

[Blue.Fairy2]

We bought our first house through the VA this way. Buying though the VA is a little different they set the bid and you make the offer they time stamp all offers and if multiples offers come in the one with the first time stamp wins.

Knowing this we drove our bid and the full selling price in the form of a cashiers check to Nashville. We did not know for 2 weeks whether we had won or not, it was agonizing but so worth it.

Yes you may not know what you will get into but usually for the price you pay it is worth it.

 

[catgirl]

Thanks to all that responded. I've done some more checking and crunched my numbers with the bank. They say I can afford to make a bid, but getting a little nervous and thinking maybe I should just let it go. I have knots in my stomach thinking about the possible stress a second home could be in this economy. I think I should listen to my gut and forget it. This way we are still ok if one of us were to loose our jobs.

 

[Melrosgirl]

My friend is going through this right now. She made an offer the very first day. Bank came back 2 days later and said they wanted full asking price and to make it a cash deal. They didn't want to accept financing. She accepted and is still going back and forth with the bank.

 

[MineMail]

Lots of good advice here, thank you all. I've always wondered about these types of houses. A friend's new BF has his own business maintaining homes that the banks have taken over. In some cases, they just need some curb appeal, in others, the wiring/plumbing's been gutted or the owners walked their dog inside the house before leaving. (ewwww)

If you do buy a house that's been vacant for a while, take my advice and have the sewer main snaked out before you move in. It's a worthwhile investment - we had the main back up after 2 hours of cleaning into the basement. What a mess! Everyone we know that's been in the same situation and ignored our advice ended up with a mess when the same thing happened to them.

There have been construction guys there ever since. They tore out an entire semi-trailer-sized dumpster of drywall / pink insulation, what looked like half the interior doors, and a couple toilets, in addition to taking out and boarding over the kitchen bay window. We're guessing water leaks in the bathrooms + being closed up in the heat = mold necessitating the removal of all porous surfaces.

You never know what you're going to get.

Could be unseen damage, but it could also be clever renovators or "house flippers."

It's so much easier to do renovations before you move in. When we bought our current house, we had all of the messy work (running electrical lines, replacing countertops, tiling) done before we moved in. Maybe the owners wanted to update the kitchen and bathrooms now instead of when they go to sell the house.

We saw a similar situation - tiny cottage that backed up to a park. It was in good shape, but had been vacant for a while. The new owners bought it for a decent price, but never moved in. The neighbors were nervous that it was vacant for so long.

The buyers completely gutted the place except for one interior wall. The cottage became a McMansion. They used a home improvement loan to finance the deal, but everything except that wall was brand-new construction.

They ended up with a huge house on a park worth many times what they paid for it initially.

 

[3boymthr]

Also be aware that you may have to be pre-registered to bid on a foreclosure that goes to auction...

A co-worker had a neighbor become addicted to meth, loose his business, then they went personally bankrupt and then he lost their home in the process. My co-worker said that before they went bankrupt they were spending money like mad.

A friend of the co-worker (D) wanted to buy the house but didn't know that he had to pre-register. D went to the auction but couldn't bid. The house went unsold and reverted to the bank. Good new is because both D and the bank's real estate agent were at the auction D was able to put in an offer to the bank while at the auction. Bad news he's going to end up paying more than the minimum bid. Despite paying more than the minimum bid he's still getting a bargain; the bank is setting the price for the house at $500,000 about 1/2 the market value and... it comes furnished - there's even a grand piano No wonder the family went bankrupt.