Question about purchasing a foreclosure

[tink_n_pooh]

DH and I are house hunting and many of the homes on the market are foreclosures. I know there can be a lot involved in buying a home which has been foreclosed on but there is one thing that a friend of mine keeps bringing up to me that just sounds nutty....

She is trying to tell me that a real estate agent told her not to purchase a foreclosed home because the original homeowners (the ones who are losing the house) have up to 1 year to come up with the money to get the house back after the new owners have purchased it. I can't fathom how this could be true and I can't find anything on it anywhere so I'm going to guess she is nuts

I know that the DIS has all the answers...

 

[The Mystery Machine]

Not sure honestly, but it does not sound correct to me either.

We looked at foreclosures and the "AS IS" is what scared us.

 

[Mskanga]

Not true. We bought our home that was a foreclosure. The old owner has driven by a couple of times , and I know because she stopped once even to talk to us outside.

 

[phragmipedium]

Not sure honestly, but it does not sound correct to me either.

We looked at foreclosures and the "AS IS" is what scared us.

In this market, you may be able negotiate. We gathered some bids on some necessary work on our foreclosure that would need to be done for us to get a clear pest and dry rot, and therefore get financing. Our house was listed AS IS. But the lender who owned the house paid for the work.

ETA - I've heard the same rumor you are mentioning, OP, and I think they need *the entire* remaining balance that they had owed on the home, within one year of being foreclosed upon. I don't know how accurate this is, though - we had a few months before it would have been one year, and we took the risk.

 

[C.Ann]

My DD and her DH's first home was a foreclosure they purchased - "As Is".. Nothing of that nature was ever mentioned to them - or in any of the paper work - and if it were true, it would fall under the guidelines of "full disclosure".. They lived there 7 years before selling it and moving to a bigger home in a different town..

I don' think your friend has her facts straight..

 

[MrsPete]

DH and I are house hunting and many of the homes on the market are foreclosures. I know there can be a lot involved in buying a home which has been foreclosed on but there is one thing that a friend of mine keeps bringing up to me that just sounds nutty....

She is trying to tell me that a real estate agent told her not to purchase a foreclosed home because the original homeowners (the ones who are losing the house) have up to 1 year to come up with the money to get the house back after the new owners have purchased it. I can't fathom how this could be true and I can't find anything on it anywhere so I'm going to guess she is nuts

I know that the DIS has all the answers...

No, either she misunderstood or the real estate agent had some reason for wanting her to purchase the other house.

It IS true that owners get a pretty long while before they're actually kicked out of the house. The bank has to go through a lot of steps to foreclose, and at any point along the way the owner could come up with the money and stop the proceedings. However, once the house is foreclosed upon, as far as the original owner is concerned, the house is GONE.

What you should be concerned about is whether the owners had a second (or third) mortgage on the house -- today they're more commonly called home equity lines of credit or home equity loans. Also, you need to know whether the owners have any leins against the house; for example, if they had a new furnace put in or if they had work done to their plumbing, and then they didn't pay, the person who did the work may've put a lein against the house so that when the owner sells, they get paid. People who lose their houses tend to borrow from all sorts of places before they reach "the bottom", so these extra-loans are rather common.

If you buy the house from the bank, they'll expect you to pay the remaining portion of the mortgage AND any of these extras.

When we were looking for our first house, we thought a foreclosure might be a great option for us. We found two that we liked, but in both cases the total owed on the house was essentially the market value AND the houses were in bad conditions. We would've been buying a fixer-upper for full price. Not such a good deal.

 

[binny]

Not true. We bought our home that was a foreclosure. Once it is Repoed the bank owns it and may sell it to whomever

Yep that was our experience as well and BTW Hi MsKanga, Stranger!

 

[Connieh]

I think she is thinking about a tax sale. I believe in the case of a sale due to deliquent real estate taxes the owners have a specific amount of time to settle up.

Hope that helps.

 

[minniecarousel]

You should be safe to buy - isn't that what a title search is for? To make sure there are no liens or other possible owners of the property?

 

[Tink888]

Your friend might be confusing foreclosure properties with tax or sheriff sale properties. Those are properties in which the homeowner lost their home due to failure to pay property taxes. The county takes the home and then sells it at a tax or sheriff sale at very low prices (in many cases you can get them for the amount of the unpaid taxes).

In many states the homeowner who lost the home has what is called a redemption period during which time if they come up with the amount to pay the delinquent taxes, they can take title to the property back.

Tax sales are what a prospective buyer must be very careful with, not only because of possible redemption periods but also because of prior liens that have attached to the property and other title defects.

Foreclosures properties are generally safe once the bank has taken title. It goes the same way a regular sale would except the bank is the seller. The buyer would have the option to purchase title insurance (and if you are taking out a mortgage to purchase, your new lender would require it). An owners policy of title insurance would insure you from any liens or title defects not dealt with at closing.

 

[mrsv98]

No, either she misunderstood or the real estate agent had some reason for wanting her to purchase the other house.

It IS true that owners get a pretty long while before they're actually kicked out of the house. The bank has to go through a lot of steps to foreclose, and at any point along the way the owner could come up with the money and stop the proceedings. However, once the house is foreclosed upon, as far as the original owner is concerned, the house is GONE.

What you should be concerned about is whether the owners had a second (or third) mortgage on the house -- today they're more commonly called home equity lines of credit or home equity loans. Also, you need to know whether the owners have any leins against the house; for example, if they had a new furnace put in or if they had work done to their plumbing, and then they didn't pay, the person who did the work may've put a lein against the house so that when the owner sells, they get paid. People who lose their houses tend to borrow from all sorts of places before they reach "the bottom", so these extra-loans are rather common.

If you buy the house from the bank, they'll expect you to pay the remaining portion of the mortgage AND any of these extras.

When we were looking for our first house, we thought a foreclosure might be a great option for us. We found two that we liked, but in both cases the total owed on the house was essentially the market value AND the houses were in bad conditions. We would've been buying a fixer-upper for full price. Not such a good deal.

This is all true and there is a fairly easy way to see if there are any liens against a house (if the assessor and county clerk are on line). In my county, I can go to the Cook County Assessor's office web site and do a PIN search by address. Once I have the PIN, I can go to the County Clerk's office and do a PIN search and any lien, les pendes, mortgage, second mortgage, etc will show up. It will also show if these have been paid or released.

There was a house I suspected was going into foreclosure and I was interested in flipping so I did this search and found all the info I needed. Armed with this information, you should be able to make a better decision about the house and whether it is a "deal".

 

[msdis]

In some states this is absolutely true. MI quickly comes to mind. The foreclosed owner has one year to purchase it back at the foreclosed price and force the "new" owner out. Check your state laws. They are all different.