Has anyone ever bought a foreclosure home?
Question:
Answer:
I have both bought and sold homes in foreclosure. However, you need to thoroughly understand the process of foreclosure before you try it.
In most states the foreclosure process is regulated by strict laws. The process of foreclosure usually takes about 5 to 6 months, not including the time to actually evict the former owner or his tenants. During that period of time the owner of the property is allowed to cure his default. He can usually do so until about 5 business days prior to the sale. If he goes beyond that point he can only cure by paying off the entire balance.
In most foreclosures where the auction price is "below market" the owners will refinance, sell, or file for bankruptcy long before the date of the auction. What this means to you is that you will investigate a hundred foreclosures before finding one that actually goes to sale.
Bidding at a foreclosure sale can be VERY tricky. Remember - it is not always the first deed of trust that is being foreclosed. So if you see a foreclosure auction where the price seems very low, the chances are that the foreclosure is on a second or third mortgage or deed of trust. If you bid at such an auction, you will not be buying a first position, you will be buying a second or third position and will take the property "subject to" any prior liens, mortgages or deeds of trust. If you intend to bid at a foreclosure, you should ALWAYS get a preliminary title insurance policy or have your attorney check the title and tell you what you are bidding on.
Even if it is a first deed of trust, and even if it is a bargain, the property may be a toxic waste dump and as the purchaser at a foreclosure sale you would be required to clean it up. The property may contain a burned out structure that needs to be demolished, and you will have to pay to demolish it. If it is vacant land, the property may be an undersized lot or otherwise unbuildable. If it has a building on it, the building may have extensive dry rot, termites or other problems. Once you purchase it you will have to repair this damage. You don't get to inspect the home prior to bidding and you have to take it "as is". Obviously, if the home is occupied, you will have to evict the tenants. This can take two or three months and can cost you a couple of thousand dollars in attorneys fees and costs.
Last, but certainly not least, is the fact that you must pay all cash at most foreclosure sales. No bank will usually finance such a purchase.
I own a foreclosure company, and my advice to you is to contact the REO department of your local bank or Savings and Loan. You might also check with FHA or HUD, as both of these agencies re-sell properties that they have foreclosed upon.
After a bank or S&L forecloses and takes back property, they evict the occupants and put the home up for sale. Federal law prohibits them from holding onto too much foreclosed property, and they are usually anxious to get rid of them. These properties are usually priced below market and you get to inspect the property and can usually finance the property through the bank that did the foreclosure.
Hope that helps!!
Yes, I have bought plenty. I got one for $26k and it's worth $80 after spending 12k. I am a real estate agent and I flip houses also.
Yep. I got a great deal. Of course you need to beware of the conditions in the sales agreement. Usually it's sold in "as is condition". If you choose to buy a foreclosure, be sure to have it inspected for any serious damages (like mold, asbestos if it's an older home, water damage, damage to the foundation, etc).
Yes, I own a few.
I would not do it now, as most seem to have multiple loans for more then they are worth.
Too many people bought homes they simply could not afford.
You are better off (well, I am) looking for VERY short short sales to invest in. I am having good luck with my low income rentals (under 1k rent) right now so would only increase my inventory in that market.
I am still holding out though, the market is still dropping.
Buying foreclosed homes can be a good investment. They are usually offered at a very low price as someone didn't make their mortage payments to the bank. The bank want's their lent money back as soon as possible (think pronto).
However, foreclosed homes are usually offered in "as is" condition. Which means nothing is guaranteed. It is solely up to you to find out if there are any problems. For example, you may want to hire a home inspector to go over the property and see if there is any structural or building code problems. Don't forget the most important thing - adequate and healthy water supply. You will want to determine if the survey is adequate enough for mortgage and registration purposes. And you may want a title examiner to research the history of the home to ensure everything is ok. Remember, you may want to sell the home in the future yourself, and if you don't deal with problems now, you might be in for a costly surprise down the road.
If the house is in good shape, you should have no problem getting a mortgage. You may even find that the bank who foreclosed on the home would be willing to finance your mortgage. If you meet their credit requirements.
I'm speaking in Canadian here. I'm not sure how the Americans do it. But, I still think there is some good advice here to keep in mind no matter where you live.
Good luck.
Update: Wow, you Americans have got it tough down there! We also have a period of time when the foreclosed owners have the right to cough up what they owe and get the rights to their property back. However, in Canada, you have the right to take a look at the house before buying it. Foreclosure or not. "As Is" here means - we aren't going to guarantee the home, fix it, ensure title, or anything, period. It's all up to the potential buyer to be aware of what they are getting.
Besides the great price, HUD foreclosure properties also have other benefits to potential buyers. Not only does the government have programs that give HUD foreclosure properties buyers additional money for things like repairs and closing costs, there are also local and state programs that give HUD foreclosure properties buyers similar perks. There are actually tons of these programs out there, and the best way to find out about them is to get in touch with a realtor who knows HUD foreclosure properties. They can point the way to programs that fit your specific needs and help you buy your HUD foreclosure property for less.
Read these links below for great info.!
Buying a Home in Foreclosure: What You Need to Know
Buying Foreclosures - The Drawbacks to Buying Foreclosures
More Related Questions & Answers...