Buying foreclosed homes...anyone have experience ?

[compguy786]

Guys,

I am a recent grad with good credit, and landed a job righit before i graduated. Since i am young, live at home, i am thinking about buying a foreclosed house this year. I want to buy i and turn in to a rental property, so that i have supplemental income, which may be able to pay for my college loans, and to have tangible property.

I am looking at houses from 0-100k, and really want to move forward with such an idea. Has anyone on here bought REO properties ? How does the mortgage work on these ? If i did get a house mortgage would tops be $300, which my goal of renting a property out at $8-900.

What do you think ? I really wanted to buy a new car, but id rather do this first. Market is good for renting right now, and many people are not purchasing as well.

Thanks !

 

[boomhower]

From what I've seen it varies greatly depending on who owns the property. I bought a foreclosure that was owned by the FHA folks. It was an almost completely painless process. The biggest pain was getting the inspection done. I have to pay to have it dewinterized, turn on the utilities in my name, and then have it rewinterized. We didn't run into problems with it taking way to long to get answers back. It may have took a day or two longer than it would have with a regular property. Overall my experience was very positive and I got a great deal on the property. My suggestion is to find a property and then do some research on than bank as a seller. Some just aren't worth the trouble.

 

[Jimzz]

My house was a foreclosure.
It does really depend on the bank and location. If the bank is really trying to unload they will deal quickly. But many are in no rush to be the person to sign off on a lose so many banks drag their feet and are a pain.

i.e. don;t fall in love with any house until everything is signed and you have keys.

 

[dabuddha]

My home was a foreclosure and I have to say overall, it turned out well. The house was already listed almost 25k below the surrounding properties and we offered 50k below the asking price and the bank accepted. Plus they covered all the closing costs as well as a bit more to get me a 1/8% lower interest rate. As far as the house goes, I've spent the last 2 years renovating things piece by piece:

New carpeting
New laminate flooring to replace the vinyl flooring
Tiles in the kitchen floor
Replaced all the appliances
Painted the whole house top to bottom
Little bit of repair work on the deck in the back.

But I did all this myself and I spread it out over time which saved me a ton of money.

 

[cardiac]

Do you own your own home? Doesn't make sense to have a rental property if you yourself are paying rent to someone else. Buy a home for you to live in, then work on those rentals...... If you bought a $100k house, your mortgage will be a little more than $300, depending on terms..

 

[Red Squirrel]

When I spoke to my bank about it, they said they usually try their best to get the fair market value for the house, so the client can "profit" from it. As in, get some money to help them in their financial situation. Chances are if it's been foreclosed they lost their job or something so they at least want to try to get back what they paid on it so far. So with that said a foreclosure probably wont be any better price than a non foreclosure. No matter what though, always get a proper inspection, on top of yourself doing an inspection as well.

 

[Jimzz]

When I spoke to my bank about it, they said they usually try their best to get the fair market value for the house, so the client can "profit" from it. As in, get some money to help them in their financial situation. Chances are if it's been foreclosed they lost their job or something so they at least want to try to get back what they paid on it so far. So with that said a foreclosure probably wont be any better price than a non foreclosure. No matter what though, always get a proper inspection, on top of yourself doing an inspection as well.

??? I don't think you know what a foreclosure is.

You are thinking of a short sale maybe? A foreclosure means the banks owns it, they are the "client" and just want to get rid of it.

 

[Red Squirrel]

??? I don't think you know what a foreclosure is.

You are thinking of a short sale maybe? A foreclosure means the banks owns it, they are the "client" and just want to get rid of it.

Isin't a foreclosure when the owner could not afford it so the bank now owns it? So when the bank sells it some of the profit would go to the owners. At least that's what my bank told me when I had inquired about it. They don't get listed so without asking you normally don't know about them. They did not have any at the time I asked though. They're not really that common. People will normally sell before it goes to foreclosure. (ex: they lost their job or something and can't afford it anymore)

 

[dabuddha]

Isin't a foreclosure when the owner could not afford it so the bank now owns it? So when the bank sells it some of the profit would go to the owners. At least that's what my bank told me when I had inquired about it. They don't get listed so without asking you normally don't know about them. They did not have any at the time I asked though. They're not really that common. People will normally sell before it goes to foreclosure. (ex: they lost their job or something and can't afford it anymore)

Foreclosure means the bank owns it and nothing goes to the previous owners at all.

 

[NetGuySC]

My home was a foreclosure. I dealt with the banks real estate agent and before the agent would even accept an offer I had to provide a "Proof of funding" letter with my offer. The house's tax value was $123k, but the previous owners left the house a complete mess, filthy carpet, all walls were filthy, every door in the house was damaged and most were falling off the hinges, also there were 100's of dead flies throughout the house from where the previous owners left with food still in the fridge and freezer. The house had sit on the market for 1.5 years. I saw it for sale, snuck in to look inside and immediately saw the potential. Three months later, the house was mine for $28,500. Mostly the house needed a very very good cleaning and all the doors replaced, paint and carpet.

So my advice is to try and find a home that the previous owners tried to basically destroy before they were foreclosed upon. Most people can't see past the damage or filth to see the true potential of a house.

 

[Jimzz]

My home was a foreclosure. I dealt with the banks real estate agent and before the agent would even accept an offer I had to provide a "Proof of funding" letter with my offer. The house's tax value was $123k, but the previous owners left the house a complete mess, filthy carpet, all walls were filthy, every door in the house was damaged and most were falling off the hinges, also there were 100's of dead flies throughout the house from where the previous owners left with food still in the fridge and freezer. The house had sit on the market for 1.5 years. I saw it for sale, snuck in to look inside and immediately saw the potential. Three months later, the house was mine for $28,500. Mostly the house needed a very very good cleaning and all the doors replaced, paint and carpet.

So my advice is to try and find a home that the previous owners tried to basically destroy before they were foreclosed upon. Most people can't see past the damage or filth to see the true potential of a house.

Yea we had to gut our house after we bought it. At first we thought we could do simple carpet/paint/etc... but then we found mold. Then the insurlation was rotten. Then there was a hole in the shower that allowed water behind it. and on and on.

So if YOU are handy then you can find some great deals. But if we had to pay someone then no it would have not been worth it.

 

[Uppsala9496]

For REO sales some banks will not let you purchase unless you are going to live there (ie, no renting the place out).

 

[EagleKeeper]

For REO sales some banks will not let you purchase unless you are going to live there (ie, no renting the place out).

If you tell the lender that you are going to rent instead of live there; they have different requirements.

Some requirements on a note state that you intend to live in the property for x years.

Also, it affects the insurance requirements.

 

[Wreckem]

Isin't a foreclosure when the owner could not afford it so the bank now owns it? So when the bank sells it some of the profit would go to the owners. At least that's what my bank told me when I had inquired about it. They don't get listed so without asking you normally don't know about them. They did not have any at the time I asked though. They're not really that common. People will normally sell before it goes to foreclosure. (ex: they lost their job or something and can't afford it anymore)

Foreclosure is cutting off the equity of redemption, the ability to pay off the mortgage and keep the property.

What happens after you default, they send you a notice of acceleration and give you x number of days to pay off the entire mortgage. When you fail to do that, they proceed with foreclosure, which type depends on the state and/or your mortgage/deed of trust.

When the house is foreclosed it goes up for auction. This is where if a house sells for more than what is owed, the mortgagor(borrower) gets the money or conversely, if allowed by the state the mortgagor is still on the hook for the remainder of the balance. Once the auction is over and the bank bids and wins the auction, which they almost always do as they aren't going to let a $200k house go for $50k at auction, the original mortgagor doesn't get a dime even if it sells for more than the amount owed.

But its all moot, as a foreclosed house will almost never go for more than what is owed on the mortgage, either at auction or after the auction. That is unless the mortgage was almost paid off. In that scenario, the bank would more than likely work with the mortgagor to avoid foreclosure.

 

[KeypoX]

Have you guys bought directly through the bank? I was told that you have to have some professional do it for you?

 

[Jimzz]

..

 

[Jimzz]

Have you guys bought directly through the bank? I was told that you have to have some professional do it for you?

Banks usually hire a realtor unless you are buying in Bulk and that requires a LOT of money before they will even think of dealing with you.

 

[Blackjack200]

Do you own your own home? Doesn't make sense to have a rental property if you yourself are paying rent to someone else. Buy a home for you to live in, then work on those rentals...... If you bought a $100k house, your mortgage will be a little more than $300, depending on terms..

I disagree, I have a rental and might soon have another. I wish I didn't own my house, I'm trying to rent out rooms in it to offset some of the cost of paying the mortgage, but realistically the best I could cover is 75-80%. Then I have utilities, repairs, etc. etc. etc.

If I was just renting a room or two myself I could be saving a lot of money.

On the other hand, when you buy a house you learn a lot about the buying and maintaining of houses, so I probably applied some of that.

Hmm, hard to say I guess. :\

Banks usually hire a realtor unless you are buying in Bulk and that requires a LOT of money before they will even think of dealing with you.

You can look at their websites and they will have a sortable list of their REOs and the listing agencies for them.

 

[Blackjack200]

Personally, I think foreclosures are overrated. I think the better deals are had buying from people that own their houses outright and just want to get out, or houses that have been on the market at least 6 months. It's easy to put a feeler out there and see if they'll come down in price. The place I might buy now was listed at $50 or $60k six months ago. The listing agent just signalled that they'd accept an offer of $25k (cash deal though). It's not a foreclosure.

 

[jtvang125]

When I was looking back then almost all the REOs I saw were in pretty bad shape and needed a lot work. After veiwing a few I just filtered them out on my searches. Of course this will vary greatly on the area though. I ended up buying mine on a shortsale.

 

[dabuddha]

When I was looking back then almost all the REOs I saw were in pretty bad shape and needed a lot work. After veiwing a few I just filtered them out on my searches. Of course this will vary greatly on the area though. I ended up buying mine on a shortsale.

This is true. When I was looking, I told our agent that my main requirements were

1) Must be a foreclosure
2) Must be in a court
3) Must have a garage

We saw at least 12-15 houses before finding the one we loved. Out of the 15 we saw, I'd say 5-6 were in good/excellent condition. One that we saw had animal feces spread all over every square inch of carpet throughout the whole house. One had a previous water problem in the basement and the basement walls were literally a solid "carpet" of mold all the way to the ceiling.

 

[SheHateMe]

Wouldn't taking out a Mortgage on a house be counterproductive? You want to pay off your student loans by taking in even more debt and you expect to rent something for $8-$900/m with no guarantee that you will find a tenant and if you do...a reliable one.


When you have to start making payments on your student loans every month, you will still be making payments on the mortgage. That doesn't sound like a good idea.

 

[Jimzz]

When I was looking back then almost all the REOs I saw were in pretty bad shape and needed a lot work. After veiwing a few I just filtered them out on my searches. Of course this will vary greatly on the area though. I ended up buying mine on a shortsale.

Thats kinda the point for someone like myself. I can fix anything in a house so if I can get it cheap enough it works out great.

But as I said before if you can’t do plumbing, electrical, flooring, etc… then it would probably not be wise.

 

[TangoJuliet]

Wouldn't taking out a Mortgage on a house be counterproductive? You want to pay off your student loans by taking in even more debt and you expect to rent something for $8-$900/m with no guarantee that you will find a tenant and if you do...a reliable one.


When you have to start making payments on your student loans every month, you will still be making payments on the mortgage. That doesn't sound like a good idea.

SHM makes some great points. In theory it sounds like this is a great way to make some cash, build equity, etc but you also have to think about the downsides.

You have no idea the type of tenant you are going to get. You can look at their credit reports, etc and it can look good on paper but you never will really know until they get in and then in may be too late.

You could have a tenant that just decides to trash the place, a tenant that doesn't pay rent on time and even worse a tenant that doesn't pay rent. Depending on the state that you live in it is VERY hard to evict someone.

Thats just the tenant side of things. If you are buying a foreclosure there is a good possibility that the property has been neglected. Even after having the property inspected something could go wrong....a leaky roof, a broken dishwasher, etc.

So your best case scenario is that you have a great tenant that pays on time and you are pocketing a couple hundred then BAM your hot water heater goes and everything you made for the year goes down the drain. The only way I can see this being a good thing is if you are tripling what you are paying for the mortgage ie your mortgage is $500/m with taxes, etc and you are charging $1500/m for the property. Or you plan on moving into the home a couple years down the road.....but then again kicking your tenant out may become difficult. Trust me I have been on both sides. I am currently a landlord.

 

[compguy786]

Wow, amazing posts !

I wanted to get a new car initially, instead someone told me to get a property first and make that pay for your car....I have $17k in loans which I'd like to get rid of within 1.5 yes. I live at home so I have no extra bills other than loan.

I'm trying to do this early onbecause I think I have the time and energy to do it