Purchasing a forclosure house???

[lovebuzz]

Hi! We are thinking about putting an offer in on a foreclosure house and I was wondering if anyone has any wisdom they would like to share.

Thanks in advance.

 

[Lisa loves Pooh]

Get an inspection.

 

[Pakey]

Be prepared to do any outside repairs immediately or your homeowners insurance will not continue coverage. We had to tear out decking, put in sidewalks and replace fencing within the first month of owning on our rental property because our insurance would not cover the house until these things were fixed. Thank goodness they didn't end up requiring us to paint although it was on their first list of required repairs.

Also, anything found in inspection could result in your new lender requiring you to fix those items prior to closing or at least putting money into a trust account guaranteeing you will fix said items (we had 2 things that we had to do this for).

 

[KathyTX]

It'll be pretty much "as is"- not much room for you to add contingencies ("fix this-or-that" first) in your offer. And the bank probably won't be interested in low-ball offers unless it's been sitting in their inventory for a long time.

If it's listed at a price you're happy paying after considering any repairs you'll need to make to it, and is priced correctly for the area, it could be a good deal.

 

[starann]

Get an inspection.

I have to agree. My DH is a building inspector and has been dealing with bank owned houses for too long now. The banks basically let the houses sit vacant until all paperwork is squared away, which can take over a year! He had one house, a town home where the pipes burst and leaked into surrounding homes, when they went into the forclosure, there was mold everywhere. The bank just kept giving him the runaround about sending someone out to fix it...until he started sending them hefty fines. The other homeowners were made to suffer as they now had to have a proper cleaning crew come in to clean the walls between the homes!

 

[The Mystery Machine]

Pay for a inspection before you put in the offer. You need to know what you are getting yourself into because a foreclosure home is sold "as is". You have NO RECOURSE no matter what is wrong with the house. I think they are free from disclosure.

We tried to get a house in foreclosure. The bank had no interest in entertaining any low ball loan offers. If you want to low ball a house you need 100% cash up front. Then they seem to want to talk.

The house we wanted needed to be gutted. I imagine a house flipper bought it or someone with money that could afford to sink the 150,000+ into it up front.

 

[floridalaurie]

We recently bought a foreclosure. The bank accepted our offer(bidding war and we pd $7000 more than asking) at the beginning of April. We never closed until August since we were waiting for the bank to hook up water and sewer. They do drag their feet, especially if they aren't getting a lot of money. We are very happy with our purchase. We tore up all the carpets and tiled every room, painted inside and done some trim painting outside and we replaced almost all the appliances. A foreclosure takes a lot of elbow grease and sweat but if you don't mind that, there are some great deals out there. Good luck with your decision. I 2nd getting the inspections also.

 

[Liberty Belle]

Get an inspection and don't be surprised if the bank will take cash only (no financing).

 

[Colleen27]

As others have said, get an inspection. Not only has the house been empty a long time (often a year +), there's no guarantee that the companies the bank used for cleanout and winterizing were competant. A lot of the plumbing issues we fixed the first week we lived here were due to improper winterization, as was an issue we had to address with our boiler.

Also, expect the process to be long and full of delays. You aren't dealing with a seller who wants to close and move on to a new home; you're dealing with a bureaucracy that is often not even located in the same state as the property. So everything takes longer.

As far as low-ball offers go, that's going to depend on your local RE market and the bank. We've dealt with some that wouldn't even look at offers of less than 95% of asking (and those tended to be the ones with the least realistic asking prices to begin with - one house in particular that we made an offer on is STILL on the market a year later because they're asking WAY more than the current market will bear for a fixer). Others are more motivated to get rid of the tax & upkeep liabilities associated with letting the house sit.

If you're willing and able to put up with the headaches, it can be a great experience. We have done it twice, and both times got more house for the money than we would have in a non-forclosure sale. The house we just bought was a steal - on the market for 6 months, VERY motivated bank selling, and we were paying cash. There were still delays and annoyances, but in the end we have the house we're going to live in at least until our children are grown and we got it for about 20K less than we anticipated spending.

 

[Carly_Roach]

I advise an inspection as well. It's also good to keep in mind that the house may not have been maintained properly because the people who went through the foreclosure may not have had the money to keep it maintained in the first place. The window-dressing of seeing nice paint and fixtures may be hiding a deeper cancer that you won't discover until you've lived in that house for a few months.

I know of at least one foreclosed house that had foundation problems, a leaky roof, a sewer-line that needed to be replaced and hidden black mold in the bathroom. The previous owner simply didn't have the money to get those things fixed and seemed relieved to be walking away from that disaster. The bank doesn't seem to have any interest in fixing those issues, either.

So just be aware that, while there are good houses out there on the foreclosure market, there may also be some real duds that you might wind up paying more for in the long run.

 

[AKL_Megs]

Pay for a inspection before you put in the offer. You need to know what you are getting yourself into because a foreclosure home is sold "as is". You have NO RECOURSE no matter what is wrong with the house. I think they are free from disclosure.

We tried to get a house in foreclosure. The bank had no interest in entertaining any low ball loan offers. If you want to low ball a house you need 100% cash up front. Then they seem to want to talk.

The house we wanted needed to be gutted. I imagine a house flipper bought it or someone with money that could afford to sink the 150,000+ into it up front.

YES, YES, YES to ALL of this.

We looked at MANY foreclosures, most of them left us , but obviously you've maybe found a nice one! Everything we found had ripped drywall from where the previous owner pulled out copper wire, bleached and paint stained hardwoods and carpet, holes in the walls, mold, broken toilets, etc.

We just couldn't see having to spend so much upfront just to live in the house. But, perhaps you can, or have found something that doesn't seem so bad. Still, GET AN INSPECTION BEFORE!!!

Also, most really do only accept cash only, or conventional loans... no FHA, etc.

 

[lovebuzz]

Thanks everyone for the great advice. Yes, we plan on getting an inspection.

The house has been bank owned and on the market for over a year now.

They originally had it listed for $580,000. Then went down to $480,000 and now they dropped it to $460,000. It needs a lot of work, but it is a diamond in the rough.

Once fixed up and looking shinny and new the comps in the neighborhood go for the high $600,000.

Right now it does not have a kitchen in it. For what ever reason the gutted it on a nine year old house, anyway we have to figure out how much that will cost and get an inspection before we put in an offer.

 

[mrsheppo]

We just moved in to the foreclosure we purchased. The best piece of advice is the inspection. It was worth every penny. Luckily our home only had a couple of minor issues that cost us less than $500 to fix, some can make or break the deal. While a lot of banks want cash, we were able to go FHA as this was a HUD foreclosed home. In dealing with the government, they had 2 stipulations of what needed to be fixed within 90 days of possession of the property and we had to put money in an escrow account to guarantee the repairs. We had to paint the patio cover which some of the paint had dried up and cracked and fix one light fixture in the kitchen along with covers on all the electrical outlets.

We just completed those items so we are awaiting inspection from HUD to get our escrow money back.

Price is definitely depending on your area. We were able to get our home for $15,000 under asking price. Other homes of the same floor plan in the same neighborhood were going for $15,000 - $30,000 more than we paid.

Good luck in finding a home you will love.

 

[AKL_Megs]

Thanks everyone for the great advice. Yes, we plan on getting an inspection.

The house has been bank owned and on the market for over a year now.

They originally had it listed for $580,000. Then went down to $480,000 and now they dropped it to $460,000. It needs a lot of work, but it is a diamond in the rough.

Once fixed up and looking shinny and new the comps in the neighborhood go for the high $600,000.

Right now it does not have a kitchen in it. For what ever reason the gutted it on a nine year old house, anyway we have to figure out how much that will cost and get an inspection before we put in an offer.

If it's been on the market that long, make sure the inspector takes a GOOD look at the pipes and plumbing... it's probably been winterized, so make sure you get it unwinterized beforehand... you might have to hire someone to do this per the bank (and then rewinterize it afterwards, if you decline on putting in an offer), because an inspector won't do it, and the bank usually won't do it and you can't check that vital stuff without it... basically, it's turning the water back on, pilot lights, etc.

They probably gutted the kitchen because they probably took the appliances and countertops and cabinets when they left! You probably had really nice wood and granite or something. They probably stripped them and sold them for $$$!

 

[Colleen27]

We looked at MANY foreclosures, most of them left us , but obviously you've maybe found a nice one! Everything we found had ripped drywall from where the previous owner pulled out copper wire,

That's something rather common in our area (I'm in the Detroit metro area too) because of the economy... It isn't usually the previous owners but rather salvagers that break in once they know the property is empty. Copper has such a good scrap value that it isn't at all unusual to go into a foreclosure or vacant home and find all the plumbing and electrical wire gone, especially in Detroit and the inner suburbs.

 

[lovebuzz]

The house has been winterized, Thank you for advice on turning it back on and then re-winterizing it. I would have not thought of that.

And again thanks for all of the great advice. You guys rock!!

 

[mnrose]

well, one was a shortsale on the verge of foreclosure. But, the other three were bank owned. Here's my experience. Two of them went fine...house was a great shape (never lived in...builder foreclosures), closed promptly, bank was easy to deal with during negotiations, paperwork all in order. The other two have been somewhat more problematic. They too were in great shape (there are so many foreclosures in our area that there was simply no need to go with major fixers), but getting post closure documentation satisfactory to actually record our title has been DIFFICULT. One house I've owned for more than 18 months, and I still do not show as being the record owner with the county...the bank has yet to provide satisfactory paperwork to the county. It's more of a PITA than anything because no one is disputing title. It's just sort of a pain because all "official" notices go the record owner and not me, so things like property tax statements, etc, I do not receive. That puts the burden on me to proactively go to the county and make sure I pay my taxes in a timely manner.

Other than these paperwork glitches, which are quite customary (in my experience, about 1/2 the time), buying a foreclosure isn't that different than buying directly from an owner. It does take longer to hear back on offers, etc., and you have less room to negotiate. It is a mistake, however, to think you have NO power of negotiation. For example, the last house we purchased (a builder foreclosure), there was a need for a new roof, new siding on one side, and a driveway issue. We received 100% credit back at closing to fix these issues, even though we lowballed our offer from the outset. Generally, they will NOT fix issues, but you often can get credits to fix major problems. It depends on how desperate the bank is to get rid of the property.

You DEFINITELY want to get an inspection...and a thorough one at that. You will get nothing in the disclosure statement from the owner as they have never lived there. But, if you get a good inspection, thoroughly inspect it yourself, and are realistic, you can get amazing deals.

 

[phragmipedium]

We purchased a foreclosure, and an inspection. There were a few minor things that needed repaired prior to approved financing. Our lender and realtor told us, "No problem - that happens all the time. We just get approval for you to get in there and fix them at your expense, and then your financing goes through." DH and I were not interested in paying for repairs on a home without being 100% certain that it was going to be ours, and said so. Our realtor told us to get some bids on the work that needed to be done and she submitted them to the bank that owned the home, and they paid for the work.

We got a good deal on the house - not a super-fantastic great deal, but paid about 10% less than the asking price, and far less than we would for any other home (and in our neighborhood of choice), and much of what needed to be done to the home was simply cosmetic - lawn work, painting interiors, etc. Structurally it was very sound, which is what we purchased the inspection for. It took about 6-7 weeks from initial offer to closing, so not a ton of time longer than a regular sale - just a week or so when we were getting bids, waiting for approval on the repairs and then getting the repairs done. We would do it again.