buying foreclosed houses? anyone know how?
02-08-2008, 02:51 PM
#1
Thread Starter
buying foreclosed houses? anyone know how?
I have seen a million informercials that claim to have the secrets...
with the # of foreclosures skyrocketing, there has to be some kind of opportunity for making some $. Seems like any foreclosure that I stumble across is listed by a realtor and going for market price.
not sure if there is some trick to it? Send letters to people nearing foreclosure / sheriff sale? post those stupid signs "we buy real estate"...???
It seems like there is still too much competition on the buying end around me anyway...
with the # of foreclosures skyrocketing, there has to be some kind of opportunity for making some $. Seems like any foreclosure that I stumble across is listed by a realtor and going for market price.
not sure if there is some trick to it? Send letters to people nearing foreclosure / sheriff sale? post those stupid signs "we buy real estate"...???
It seems like there is still too much competition on the buying end around me anyway...
02-08-2008, 08:04 PM
#2
The infomercials lie! They have discovered how to make money peddling secret information on foreclosures rather than actually making the money from the foreclosure. If they were making that much money they sure wouldn't stop and let you in on the secret.
The "trick" is to find one worth buying.
Most foreclosures happen because the properties can't be sold than because the owners couldn't afford them.
With all the "B" lenders that closed that might not be the case for a small number of foreclosures for a little while, but even then most people in trouble sell their homes. If they can't sell it then it goes into foreclosure.
This means you have to be super selective and you definitely don't want to let emotion cloud your judgement. You also want hard bids for all the work necessary to get the house into shape to resell (if it can be resold) and not just guesstimate the costs.
Make sure you don't buy foreclosures that back up to apartments, condos, shopping centers, railroad tracks, busy streets, those on corner lots, or the worst thing ever, those that are close to power lines. Also keep in mind that the rules are different on foreclosure properties than owner sold properties, they don't have to be habitible (sp?) and usually if things are burned, stolen or destroyed after the contract and before closing well that's just tough titties, you've still bought the house.
I do take out loans for a number of foreclosure purchase specialists and they look at hundreds to buy ONE. Even looking full time most only buy 2-3 a year. But they make $$ on theirs.
If you buy them on the courthouse steps basically you have to find a way to pay cash for the house at foreclosure then you refinance it to get your money back. If you buy from a lender many make you put up large, non refundable earnest money amounts. If they offer some sort of special financing to sell it to you then that means it won't meet normal lender terms and you need to run far away unless you have megabucks.
The only way you get to check values to make sure you aren't paying too much is if you pay for an appraisal (at least $300). I would have an appraisal before you write a contract since the earnest money is more expensive than the cost of an appraisal and remember earnest monies can be non-refundable.
Looking to buy an FHA or VA foreclosure, they use a bid system. If the house is in good shape and is truly salable (which means it was foreclosed upon due to the owner's issues not property issues) they will sell it to the person that bids the most over the value. They offer special financing (see caveat above) and people who can't get regular financing end up with them. People who can get regular financing go out and buy a listed property because they can get it for less, because they have a much greater choice and because it will be in better shape and cost less to add your personal preference items. The houses offered at below value and without that special financing have been thru several "sales cycles" and have been found to be unsalable due to severe property or area issues.
While it is possible to find a house that the little old lady fell and broke her hip and had to let it go back, that type of property is rare.
You can buy foreclosures and make money or find a home you want to live in, it is just the odds are against you and without specialized knowledge or the help of someone with that specialize knowledge (definitely NOT a Realtor - they get paid twice the commission to help entice you to buy that dog) you are more likely to get burned than to make money.
Oh, most of those foreclosures will end up being foreclosed upon again. FHA & VA expect to get over 60% of them back in the next 3 years.
The "trick" is to find one worth buying.
Most foreclosures happen because the properties can't be sold than because the owners couldn't afford them.
With all the "B" lenders that closed that might not be the case for a small number of foreclosures for a little while, but even then most people in trouble sell their homes. If they can't sell it then it goes into foreclosure.
This means you have to be super selective and you definitely don't want to let emotion cloud your judgement. You also want hard bids for all the work necessary to get the house into shape to resell (if it can be resold) and not just guesstimate the costs.
Make sure you don't buy foreclosures that back up to apartments, condos, shopping centers, railroad tracks, busy streets, those on corner lots, or the worst thing ever, those that are close to power lines. Also keep in mind that the rules are different on foreclosure properties than owner sold properties, they don't have to be habitible (sp?) and usually if things are burned, stolen or destroyed after the contract and before closing well that's just tough titties, you've still bought the house.
I do take out loans for a number of foreclosure purchase specialists and they look at hundreds to buy ONE. Even looking full time most only buy 2-3 a year. But they make $$ on theirs.
If you buy them on the courthouse steps basically you have to find a way to pay cash for the house at foreclosure then you refinance it to get your money back. If you buy from a lender many make you put up large, non refundable earnest money amounts. If they offer some sort of special financing to sell it to you then that means it won't meet normal lender terms and you need to run far away unless you have megabucks.
The only way you get to check values to make sure you aren't paying too much is if you pay for an appraisal (at least $300). I would have an appraisal before you write a contract since the earnest money is more expensive than the cost of an appraisal and remember earnest monies can be non-refundable.
Looking to buy an FHA or VA foreclosure, they use a bid system. If the house is in good shape and is truly salable (which means it was foreclosed upon due to the owner's issues not property issues) they will sell it to the person that bids the most over the value. They offer special financing (see caveat above) and people who can't get regular financing end up with them. People who can get regular financing go out and buy a listed property because they can get it for less, because they have a much greater choice and because it will be in better shape and cost less to add your personal preference items. The houses offered at below value and without that special financing have been thru several "sales cycles" and have been found to be unsalable due to severe property or area issues.
While it is possible to find a house that the little old lady fell and broke her hip and had to let it go back, that type of property is rare.
You can buy foreclosures and make money or find a home you want to live in, it is just the odds are against you and without specialized knowledge or the help of someone with that specialize knowledge (definitely NOT a Realtor - they get paid twice the commission to help entice you to buy that dog) you are more likely to get burned than to make money.
Oh, most of those foreclosures will end up being foreclosed upon again. FHA & VA expect to get over 60% of them back in the next 3 years.
02-09-2008, 04:59 AM
#3
Thread Starter
thanks Wildncrazy.
You confirmed what seemed like the truth. Normally if it is too good to be true.....it is too good to be true....doh...
i have lucked into a few decent deals in my city properties. I bought a vacant house with cash in 1 week from a lady who just wanted to get rid of it as fast as possible instead of listing and waiting. No appraisal, no approvals, etc.....
i don't see any reason a bank would just give a house away if they could list it with a realtor and get some "bids" like you mention. At that point (at least around here) there is plenty of competition that is willing to pay what I would say is top $ for places that need work.
It would be great if I could find a house that is undervalued by $50k+ but i think like you said i would need to look at 100 houses to maybe find that one awesome deal.
Many of the local realtors buy houses too, so they have no great reason to pass a good deal on to me unless I am giving them something significant in return (which I am not)....
thanks again!
You confirmed what seemed like the truth. Normally if it is too good to be true.....it is too good to be true....doh...
i have lucked into a few decent deals in my city properties. I bought a vacant house with cash in 1 week from a lady who just wanted to get rid of it as fast as possible instead of listing and waiting. No appraisal, no approvals, etc.....
i don't see any reason a bank would just give a house away if they could list it with a realtor and get some "bids" like you mention. At that point (at least around here) there is plenty of competition that is willing to pay what I would say is top $ for places that need work.
It would be great if I could find a house that is undervalued by $50k+ but i think like you said i would need to look at 100 houses to maybe find that one awesome deal.
Many of the local realtors buy houses too, so they have no great reason to pass a good deal on to me unless I am giving them something significant in return (which I am not)....
thanks again!
02-09-2008, 05:26 AM
#4
You'll have more luck and have more to choose from just by looking for those "deals" that are on the market.
You need to look short term and long term. Every house you buy you need to buy with an eye towards selling it.
Most of the houses that have been foreclosed upon were on the market before foreclosure. They were usually on the market at a low price. They might not have started out at a low price but they ended up at a low price.
Don't be afraid to make ridiculous offers on houses that have been on the market a long time or with multiple agents.
With that said, nationwide, there should be a significant number of foreclosures that happen because the people bought the houses with the wrong financing instead of it being a property issue. These people CAN'T afford to sell them at a reduced price or at the price of the present day market because they owe too much. What will happen to them? The lenders must prove they tried to get top dollar for the sale or else the foreclosure can be overturned.
In a year or so I think we are going to see a glut of these homes being offered at good prices. Unfortunately they will have sat empty for a long time and no telling what condition they will be in.
I have said it for decades, buying a house using the wrong financing can cost you significantly more than paying too much for the house as many people are finding our now.
You need to look short term and long term. Every house you buy you need to buy with an eye towards selling it.
Most of the houses that have been foreclosed upon were on the market before foreclosure. They were usually on the market at a low price. They might not have started out at a low price but they ended up at a low price.
Don't be afraid to make ridiculous offers on houses that have been on the market a long time or with multiple agents.
With that said, nationwide, there should be a significant number of foreclosures that happen because the people bought the houses with the wrong financing instead of it being a property issue. These people CAN'T afford to sell them at a reduced price or at the price of the present day market because they owe too much. What will happen to them? The lenders must prove they tried to get top dollar for the sale or else the foreclosure can be overturned.
In a year or so I think we are going to see a glut of these homes being offered at good prices. Unfortunately they will have sat empty for a long time and no telling what condition they will be in.
I have said it for decades, buying a house using the wrong financing can cost you significantly more than paying too much for the house as many people are finding our now.
02-09-2008, 06:34 AM
#5
I lived in Plainsboro back in '97 - '98. I lived across the street from a condo complex. They had a bunch of foreclosures because people bought for $95-$100k in the '80s and then couldn't sell them for more than $60k a few years later.
I met a guy who lived there and also worked for a local branch of a large bank. He heard about upcoming foreclosures and started buying units for himself and renting them out. He was up to at least 35 condos when I lived there, and I'm sure he could still get a lot more than $60k for them.
I just checked to see what they're renting for - $855-$1440 a month. Not bad.
I met a guy who lived there and also worked for a local branch of a large bank. He heard about upcoming foreclosures and started buying units for himself and renting them out. He was up to at least 35 condos when I lived there, and I'm sure he could still get a lot more than $60k for them.
I just checked to see what they're renting for - $855-$1440 a month. Not bad.
02-09-2008, 07:56 AM
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scot, a guy from work just bought a foreclosed home down here in Hanover. It was $160k and it needs some work but after about $20-30k in carpet removal, paint and some new appliances it should "appraise for at least $220-230k. Not a "huge" money maker but at least is decent 
and yes this one was listed by a realtor too.
and yes this one was listed by a realtor too.
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02-09-2008, 11:26 AM
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Scot, once a property goes to foreclosure there are 1000's of eyes on it, you need to catch the property pre-foreclosure while the seller is distressed and offer to pay off their loan and get them out without hurting their credit. You basically need to go to their front door, say I want to buy your house because I know you need to sell it and I am not going to pay you market value for it, but I will get you out of the mess you are in without having to foreclose. It sounds predatory, but if the person is going to lose their house either way, you are doing them a favor and they know this. I am drafting a letter to send to some of the distressed owners in the area and see what happens.
This also puts you into the regular sale category where you can buy using normal mortgages, etc.
Scot, once a property goes to foreclosure there are 1000's of eyes on it, you need to catch the property pre-foreclosure while the seller is distressed and offer to pay off their loan and get them out without hurting their credit. You basically need to go to their front door, say I want to buy your house because I know you need to sell it and I am not going to pay you market value for it, but I will get you out of the mess you are in without having to foreclose. It sounds predatory, but if the person is going to lose their house either way, you are doing them a favor and they know this. I am drafting a letter to send to some of the distressed owners in the area and see what happens.
This also puts you into the regular sale category where you can buy using normal mortgages, etc.
02-09-2008, 03:04 PM
#9
But be expecting shotguns to your face when you are the 300th foreclosure goon showing up at their front door.
He is right that pre foreclosure is the way to get the best price, but I know people who do this and it is a full time job, not a way to find an occasional house or your dream home.
A lot of people are very ashamed of the foreclosure. Once upon a time I was talking to a neighbor and somehow foreclosures came up and I told him that if I ever found one in our neighborhood I'd give some body cash on the spot for their equity (this was back when you could pick up the payments on a loan). He moved out that night. He was too ashamed to mention being behind in his payments or anything.
Somebody has to buy the foreclosures. How many people will admit they've made a misteak?
IF you know more than the average person and are willing to put more time than the average person will put into the search process and are willing to take a much larger than average risk then foreclosures are an option.
But don't blind yourself and look at foreclosures exclusively. If you should happen to find a foreclosure in the price/neighborhood/financing range then consider it. Just be more leary of the foreclosure than the house down the street that wasn't foreclosed upon.
Think of it as a car with a salvage title. It doesn't have the same value as a car that hasn't been totaled.
He is right that pre foreclosure is the way to get the best price, but I know people who do this and it is a full time job, not a way to find an occasional house or your dream home.
A lot of people are very ashamed of the foreclosure. Once upon a time I was talking to a neighbor and somehow foreclosures came up and I told him that if I ever found one in our neighborhood I'd give some body cash on the spot for their equity (this was back when you could pick up the payments on a loan). He moved out that night. He was too ashamed to mention being behind in his payments or anything.
Somebody has to buy the foreclosures. How many people will admit they've made a misteak?
IF you know more than the average person and are willing to put more time than the average person will put into the search process and are willing to take a much larger than average risk then foreclosures are an option.
But don't blind yourself and look at foreclosures exclusively. If you should happen to find a foreclosure in the price/neighborhood/financing range then consider it. Just be more leary of the foreclosure than the house down the street that wasn't foreclosed upon.
Think of it as a car with a salvage title. It doesn't have the same value as a car that hasn't been totaled.
07-29-2008, 02:43 AM
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Originally Posted by Wildncrazy,Feb 9 2008, 04:04 PM
But be expecting shotguns to your face when you are the 300th foreclosure goon showing up at their front door.
He is right that pre foreclosure is the way to get the best price, but I know people who do this and it is a full time job, not a way to find an occasional house or your dream home.
A lot of people are very ashamed of the foreclosure. Once upon a time I was talking to a neighbor and somehow foreclosures came up and I told him that if I ever found one in our neighborhood I'd give some body cash on the spot for their equity (this was back when you could pick up the payments on a loan). He moved out that night. He was too ashamed to mention being behind in his payments or anything.
Somebody has to buy the foreclosures. How many people will admit they've made a misteak?
IF you know more than the average person and are willing to put more time than the average person will put into the search process and are willing to take a much larger than average risk then foreclosures are an option.
But don't blind yourself and look at foreclosures exclusively. If you should happen to find a foreclosure in the price/neighborhood/financing range then consider it. Just be more leary of the foreclosure than the house down the street that wasn't foreclosed upon.
Think of it as a car with a salvage title. It doesn't have the same value as a car that hasn't been totaled.
He is right that pre foreclosure is the way to get the best price, but I know people who do this and it is a full time job, not a way to find an occasional house or your dream home.
A lot of people are very ashamed of the foreclosure. Once upon a time I was talking to a neighbor and somehow foreclosures came up and I told him that if I ever found one in our neighborhood I'd give some body cash on the spot for their equity (this was back when you could pick up the payments on a loan). He moved out that night. He was too ashamed to mention being behind in his payments or anything.
Somebody has to buy the foreclosures. How many people will admit they've made a misteak?
IF you know more than the average person and are willing to put more time than the average person will put into the search process and are willing to take a much larger than average risk then foreclosures are an option.
But don't blind yourself and look at foreclosures exclusively. If you should happen to find a foreclosure in the price/neighborhood/financing range then consider it. Just be more leary of the foreclosure than the house down the street that wasn't foreclosed upon.
Think of it as a car with a salvage title. It doesn't have the same value as a car that hasn't been totaled.
With you