Buying a forclosure: good or bad?

Discussion in 'Homesteading Questions' started by almostthere, May 27, 2005.

  1. almostthere

    almostthere Well-Known Member

    Nov 9, 2003
    We found a house, but then found out it was in forclosure and not yet on the market. Realtor told us that the bank will most likely ask market value but only really wants what is owed(which they don't know yet, waiting on the lein search). Its on an acre and it needs work. How much I don't know yet. If its just cosmetic it might be doable. With just an acre I could handle it by myself, if I had too. I don't want cows!:haha: Its on the outside of a small tourist town so there'd be some driving but not much more than we do now anyway. But my concerns were, about financing. Do banks like to lend on forclosures? I thought I had read somewhere that they don't. Havent made any decisions yet, just trying to get all the facts we can. I posted some time ago asking about the Indy area, but dh has decided that he will only move us up there as a very last resort. So hopefully, that will never happen. :) Any thoughts?
  2. Cyngbaeld

    Cyngbaeld In Remembrance Supporter

    May 20, 2004
    SE Missouri
    Banks do lend on foreclosures. I got a mortgage on my house in CO with no problem. It was a HUD foreclosure. You will need to really look the place over well and make sure it is worth the price. Usually the foreclosures are a good deal, but not always.

  3. Alice In TX/MO

    Alice In TX/MO More dharma, less drama. Supporter

    May 10, 2002
    Texas Coastal Bend/S. Missouri
    ask the bank that's carrying the loan now
  4. marvella

    marvella Well-Known Member

    Oct 12, 2003
    i bought mine on a foreclosure last year, finanaced through the local bank. like they said, check it over and see what it needs. i reinstalled a propane cha unit, built a barn and wellhouse/ feedshed, fenced and cross-fenced. they did a countywide tax reappraisal this year, and valued it at twice what i paid for it.

    ask me if i am a happy girl. :haha:
  5. Terri in WV

    Terri in WV Well-Known Member Supporter

    May 10, 2002
    south central Kentucky(finally out of all the snow
    I think mine was worth it. The lender's even told me that I was getting a really good deal. It listed for 30,000 more than what I paid.
  6. woodsrunner

    woodsrunner Well-Known Member

    Nov 27, 2003
    It's a secret
    Be sure to get a title search done. Often a foreclosure has only a quitclaim deed. That means the people that foreclosed on it are giving up thier rights to any claims against the property. That doesn't mean there isn't another lean on the place by another bank. And that second bank, if there is one, could come after you for any claims they have against the property.

    In this day of easy home equity loans it could happen.

    Get a title search and a warrantee deed, which means the seller gaurantees there are no other leans against the property.
  7. Bluecreekrog

    Bluecreekrog Well-Known Member

    Jun 21, 2002
    S Oh.
    My city house was a foreclosure, and don't be put off by "the we want whats owed on it" story. My offer was $30,000 less than was owed and it was excepted.
  8. Lerxt

    Lerxt Well-Known Member

    Feb 22, 2005
    Absolutely get the title search done and have a good inspection done as well. We bought our place about a year ago. It was about to go into forclosure. Mobile home on 16 acres. We got it for less than the land was worth but the previous owner hadn't done much in the way of upkeep. And what he had done was really really sub-standard. Gotta figure if he couldn't pay the mortgage he probably didn't have much money to put towards repairs. Here's a sample of what we found after closing.

    • AC was out
    • Furnace didn't work
    • Main sewage output to septic system wasn't glued up and was draining under the trailer (guess how I found this out... :mad: )
    • Electrical not grounded
    • Barn electrical was mostly lamp cord and the main feed was hanging bare because he took the breaker box with him
    • Barn loft floor was rotted (discovered by attempting to walk there)

    None of this showed up on the inspection. Just make sure you are capable of handling unexpected problems if you buy a house in forclosure. Any house is bound to have little problems but the ones where the owner is in financial trouble are bound to be some of the worst.

    Fortunately we were able to fix most of it ourselves. AC/Heat we hired out but the rest was just a matter of putting the time and resources in to get it back in shape.
  9. Grizz

    Grizz Well-Known Member

    May 11, 2002
    south central pa And northeast Fl
    Woodsrunner is right!! Never buy a place without doin it!!
  10. MaryNY

    MaryNY Well-Known Member

    Oct 25, 2004
    New York
    Get a lawyer! Find one who does real estate closings for a flat rate, usually you can go talk to them or at least chat over the phone to find out what they will charge you - and those chats should be "no charge" - and they won't have quite so much to do because the title etc. will all just have been done in the foreclosure process. Just for the heck of it, you might ask to see a copy of ALL the foreclosure papers at some point. Just to see what they're like. A lawyer may cost something, but no so much as having a piece of land you either can't live on for some reason, or can't sell to anyone else, or that no one else in their right mind would want to buy, or that doesn't actually have water, or road access, or that some creditor for the previousl owner is going to turn up on your doorstep asking for money, or any of hundreds of things that could and do happen every day (I've seen a lot of them!).

    Around here - unfortunately - the way it's done is: the bank forecloses and gets title to the property; then they post when the sale is going to be held (literally on the courthouse steps at the county seat - no kidding!); everyone who is interested -- the lawyer for the bank, the bank people, prospective buyers and maybe the previous owner -- all turn up; and around here, usually the bank people outbid everyone else for the property and then sell it through some real estate person. I believe the only way that the property can be bid on around here is if the buyer has the cash, or has already been approved for a mortage for at least X-amount. Anyway, around here at least, it's usually the bank who wins! Remember that most of the time the real estate people and the bank people are usually sleeping in the same bed and feeding from the same trough.

    You might want to check and see if the bank has a survey of the property, too and get a copy, even if it isn't necessary to bring it up to date. They should have one from the previous transaction they are foreclosing on. Don't let them fool you - they almost certainly have one, and it doesn't take much to photocopy it and give you a copy.

    If the property isn't on public water, remember to have the well water tested - no sense having a place and then having to haul water to drink etc.

    Get someone - a neighbor, the previous owner, someone else who used to live on or knows the property well - to show you where the sepctic is, where the rhubarb and asparagus beds are, where the outhouse used to be (don't want to drill a well there!), where any dug wells may be (don't want the kiddies falling in there!), and any other "interesting" points about the place. Also try to find out the last time the roof was replaced, how old the furnace and hot water heater are (get the model numbers and brand names and call a local place that sells those brands and ask how old that model number is -- doesn't always work, because the model could be older, but not installed until a few years ago -- my hot water heater has that oddity - but I know for sure it wasn't installed in here the year it was manufactured); the same goes for the well pump!

    The one acre sounds great! Just a nice size for one person to take care of alone. I went to school with a girl who's folks lived on exactly one acre - called it something like "Smith's Little Acre" - so I have a pretty good idea exactly how much land you're talking about here. Really nice.

    You can post questions or PM me if you need a translation of any of the "legalities". Good luck.

  11. halfpint

    halfpint Well-Known Member Supporter

    Jan 24, 2005
    I have some different perspectives to add. My parents used to buy houses (usually forclosed on) for rental properties, rent for a few years, sell the house and buy another one. They found that they often were not the highest bidder, but since they did not have to get financing they often won the bid.

    I live in Alabama and we have a wierd law here that when a house is forclosed upon the former owner has up to one year that they can buy the house back. This is not very likely but I do know of one case where it happened. A family gave their son a portion of their land to build a house - he then proceeded to build a very nice house with a large mortgage on it, however lost his job about 2 years later and the house was foreclosed upon. Unfortunately he did not let his parents know, or they might have prevented the forclosure. However they came up with the money by refinancing their own place, and gave that to him to repurchase his house back. I don't know if any other states have laws like that, but you might want to check it out especially if it is a family property.
  12. crystalniche

    crystalniche Well-Known Member

    Apr 4, 2005
    Another thing you may want to think about. Has the former owner damaged anything out of spite? There was a house foreclosed on here and the people literally destroyed a lot of things such as electrical, septic, well etc. before they moved out--on purpose. Such a waste and totally not necessary. I think I remember hearing that the former owners even put something into the well. I guess they thought that if they couldn't have it then whoever else came along couldn't either without a lot of work. It pays to be cautious.
  13. frugalville

    frugalville Well-Known Member

    Mar 11, 2005
    Lots of great comments here. I'll just add my 2 cents. There seems to be a trend of most foreclosures going thru a national sales/liquidation agency. For example, Wells Fargo Mortgage has their own liquidation agency called Premiere Asset. This is where the national bank, Wells Fargo, dumps their foreclosure to it's sub. Premiere, then has a network of local real estate agents who they have contracts with. Most of these contracts have lowball commissions setup with them. (like 3% split for buyer and seler agent)

    You submit a bid to the agent, who in turn sends its to Premiere Asset, who checks the bid out with any 2nd lienholders, and they accept the bid, counter, or decline your bid.

    This national trend seems to be a mathmatical formula for estimated value. We we bidding on one of these locally, price was way overvalued. Gave them a resonable bid, and was flat out declined, no counter, no nothing. Takes 2 to three days per bid to get an answer back because they are national, and so many parties involved.

    Even the real estate agents can't communicate by phone and negotiate, or discuss properties. They have to submit an offer by fax, and a national agent reviews the bid. If that agent thinks it's in the ballpark, then they present it to the propert manager, who actually accepts or declines your offer.

    Again they get to pick and choose. What may be the most money, may not be the offer accepted, especially if you can pay cash. (it talks).

    In the end, we passed on the property and it sat on the market for another 4 months. They use a sliding scale price reduction every 2 weeks or so, and continue to mark it down until it sells. You also have to re-submit your offer every week to stay in the running.

    I won't go into the hoops like having to be pre- approved thru Wells as one of their requirements (although in the end , you can use your own bank)... but the list goes on...

    You still get a building inspection and pest inspection. Also give your inspectors plenty of lead time. Like make sure if the heat uses propane, they actually some in the tank before inspection. Since most of these properties are empty, most have been winterized. So inspectors have to make sure the water company takes the lock off the water to check the plumbing, and has it re- winterized afterward.

    In the end, you are buying as-is.. have your ducks in a row.

    You can also go to your local clerks office with the property address and previous owners name to pull the previous deed. It will tell you when, it was sold last, which bank held the mortgage, and for how much. This will give you a ballpark for your bid. It will also show any other liens, such as mechanics liens, and how much as well. While your there, pull the plat so you know exactly where the property boundaries are located, if not marked. I would suggest walking the property from corner to corner as well.

    Good luck with your decision.
  14. Blu3duk

    Blu3duk Well-Known Member

    Jun 2, 2002
    central idaho republic
    If the foreclosure has not happened yet, then you could find the owners, and make an offer thru them for exactly what is owed upon the property. Most likely it is not a judicial foreclosure otherwise in some states there is a year redemption period for re-claiming the property, and then too, if it went judicial there is alweays the possibility of someone bring up the fact that no one can pay any mortgage paper as written becuase there is no longer any "lawful" money issued, and that most mortgages are back by fannie may or freddie mac and the loan servicer never gained permission from USHUD to foreclose, thus the foreclosure is not lawful, and then too most judicial forecloseures happen in state courts, and an individual can step over those state courts into federal court [Erie Railroad v. Tompkins. 304 US 64 (1938) ] to get a rullling more favorable and bypass common law.

    ANyhow, forecloseures if the owner is willing to walk away and let you in if you can finance the entire property, can generally be worth the trouble, there are exceptions, and as far as a second lien on property, a person can sue for quiet title and get rid of those because they had the right to buy a forclosure at the time of sale and did not.... so that debt either transfers to the original holder with the promissory note or just goes away....

    All a person ever buys when getting real estate these days is quiet enjoyment of property, unless a person does a title search and seeks out the original patent holder and gets "assigned" patent from the heirs or assigns, and then takes the property off the "tax" rolls..... which is another topic altogether, but goes hand in hand if a person desires to actually "own" land with title of patent.