Forclosure properties? - Tilted Forum Project Discussion Community

arch13 · 07-18-2005, 05:53 PM

I like to read to the morning paper when I first get to work online, and have been paying a lot more attention to the forclosure notices in the classifieds.

I'm not quote sure how court-house step sales work, or if there is a better listing service than the classifieds that isn't for-profit.

Has anyone here had expreience with these types of transactions before?

The risks are obvious, but I'm interested to hear how others transaction have gone, and how the proccess works in practice instead of in theory.

NoSoup · 07-20-2005, 08:37 AM

I've dealt with quite few of these in the past. Actually, my most recent loan closing was the most ridiculously crazy loan closing I have ever had... but that's a story for another day.

All of the experience I have is for Wisconsin, so if you live elsewhere, take it with a grain of salt.

Typically, when a home is foreclosed on, it is required by law to be "sold on the courthouse steps" (aka Sheriffs Auction) In most cases, the lender that foreclosed on the property will bid the exact amount of the mortgage they hold on the property - seldom will the bid a single dollar more. If you are the high bidder, you are required to put a minimum of 10% down immediately, with the remainder of the balance due within 10 days. If you don't pay off the balance within 10 days, you will lose any downpayment you put on the property, so make sure you are working with someone you can trust to get the job done if you need a mortgage, or have the cash to pay it off.

In most cases, you are not allowed to enter the property before you purchase it. It would be a great idea to peek in windows and ask neighbors if they have been in the home recently to see what the approximate condition of the property is, but regardless of what you see or they say, you still could be setting yourself up for a huge loss. For all you know, there is 4 feet of standing water in the basement because the wall collapsed - or the home has toxic mold, or a huge variety of other disasterous issues.

Don't get me wrong - you can get a great deal (the most recent one I closed was purchased about $60,000.00 less than appraised value) but you can also get screwed (I had one in the past where my client purchased it for approximately 30,000.00 less than appraised value, and spend nearly 90k getting it habitable) so it's a horse a piece.

I would not really suggest purchasing a foreclosed property for a typical first time homebuyer - you'd likely want to be a bit more savvy in the real estate industry, not to mention have a substantial amount saved up for unexpected issues that may arise.

As far as finding foreclosed properties, checking with your local government offices (clerk of courts or register of deeds) would probably be the best bet, or there are sites out there that can help out. One free site that I know of is www.ushud.com - but I am not sure how helpful that site really is. In addition, check with reputable real estate agents in your area to see if there is anyone that specializes in foreclosed or distressed properties.

If I can help any more or you have any more questions, let me know!

DDDDave · 07-20-2005, 10:56 AM

Do a search on foreclosure and you find several other threads on TFP re: foreclosure properties.

Foreclosure properties are not for the faint of heart or pocketbook. As NoSoup has stated there are almost always physical problems with the properties. A lot of times people have sabotaged the properties because they are being thrown out. Unseen or unforeseen damage is the rule of the day.

The rules regarding foreclosure vary from state to state. Any research you do needs to specific to the state where you intend to buy. Some of the caveats:

A mortgage lein is not superior to a federal tax lein so do your research carefully to make sure the IRS does not have a levy on the property.

After the sale on the courthouse steps and the ten days you have to pay the rest of the money, the documents sit on a judges desk. The 'foreclosee' has the right to come in and pay off the forecloser during that time period. So essentially you do not have a deal until the ten days are up and the judge signs the papers. You will find it next to impossible to get a title insurer to write you a title insurance policy under these conditions. No title insurance means no loan. You need to be able to pay cash.

All the normal time frames mean nothing. Appraisal, not hardly. No survey, too bad. Termite inspection, nope.

OK, so how is it that you hear about all these great foreclosure deals. The answer is you buy it from the lender after they have foreclosed and have cleared up the title issues and can deliver clear title to a purchaser. The forecloser (bank, typically) will have inspected the property. They generally do not fix anything but you will at least be able to inspect for yourself. The bank may offer some kind of financing concessions.
They will have obtained a survey and a pest inspection. They almost always list these properties with a Realtor and your best bet is to find a broker who specializes in foreclosures and go talk to him.

Most of the time the lenders are owed more than the value of the property and therefore will have obtained a new appraisal based on the current condition of the property. They will not tell you what the appraisal number is but the listing price is usually within 10% of the appraised value. The bank is not trying to make money they just want to recoup their losses.

My best advice is to take a real estate attorney to lunch and talk it over with him. He will explain the state specific rules and can probably give you the names of a couple of Realtors who do foreclosures.

Good Luck.

arch13 · 07-20-2005, 11:48 AM

Wow, thanks for the responses everyone.
I guess I'll be more specific about what I'm looking at here.
Being in the design business, there are several city and state projects that are currently slated to begin within the next 24 to 48 months in the city I live in, Savannah.
I'm a city dweller myself, and have never really ventured out into the suburbs since moving here last month to start a new job as an architectural designer.
There are a suprising amount of properties in forclosure or listed in the paper for courthouse sale that are out by where a new highway is being constructed, and a few out on the main suburban feeder road leading back to the city proper that is about to have lanes added to increase capacity.
These are all within 2 blocks of major artery roads, all of which are just begining to be converted to commercial along the artery roads.

The point I'm heading towards is that I'm not interested in living in these. I'm interested in renting them short term, and selling them at a later date when commerical viability of the surrounding areas becomes a closer reality. The land they sit on may very well be worth more than the structure at some point.

I'd want to be rid of these within 36 months of purchase, meaning that no bank is going to touch me with a 10ft pole I assume.

I'm interested in what other funding sources are out there and what others experiances have been.
Being an architectural designer, I'm fortunate enough to know what the future of some neiborhoods is in terms of public works, and I'd like to be involved in these areas.
Can anyone recomend good books on this topic?
Has anyone else purchased property this way?
What else should I be looking at to get a better, braoder picture of what opertunities and pitfalls this entails?

DDDDave · 07-25-2005, 07:01 PM

I still say take a broker to lunch and ask him. Preferably a commercial broker.

You don't have any secret information. The things you mentioned are known to lot's of people but the spoils go the guy who can see, foresee and ACT.

Don't trust your own judgement--test your ideas on other people in the business. Not loudmouth RE types, but people you trust.

The broker will know lot's of people with money, and how to buy properties out of foreclosure. As I mentioned, the learning curve is steep, there is no need to go it alone. Don't try to make your first deal the 'big deal of the day'.

My thoughts might be 'Why are there so many properties in that area in foreclosure?' Perhaps people don't want to live next to the new road. Question- Why will new people want to? Commercial property takes time to mature.

Good Luck. You are on the right track. Take your time. Talk to a commercial broker.

Let us know how it is going.

Hardknock · 07-25-2005, 11:26 PM

I'll say this....

There will be plenty or forclosed properties to purchase. And you won't have to worry about their condition. Just wait a couple more years. Maybe less. When this bubble bursts, these people who are plunking down 500K for a 1200SQ house in LA will be screwed when the interest only portion of their mortage runs out and the rate skyrockets, and their payment doubles. Alll you have to do is find some in some newly construced complex.

07-18-2005, 05:53 PM	#1 (permalink)
arch13 Loves my girl in thongs Location: North of Mexico, South of Canada	Forclosure properties? I like to read to the morning paper when I first get to work online, and have been paying a lot more attention to the forclosure notices in the classifieds. I'm not quote sure how court-house step sales work, or if there is a better listing service than the classifieds that isn't for-profit. Has anyone here had expreience with these types of transactions before? The risks are obvious, but I'm interested to hear how others transaction have gone, and how the proccess works in practice instead of in theory. __________________ Seen on an employer evaluation: "The wheel is turning but the hamsters dead" ____________________________ Is arch13 really a porn diety ? find out after the film at 11. -Nanofever

07-20-2005, 08:37 AM	#2 (permalink)
NoSoup Non-Rookie Location: Green Bay, WI	I've dealt with quite few of these in the past. Actually, my most recent loan closing was the most ridiculously crazy loan closing I have ever had... but that's a story for another day. All of the experience I have is for Wisconsin, so if you live elsewhere, take it with a grain of salt. Typically, when a home is foreclosed on, it is required by law to be "sold on the courthouse steps" (aka Sheriffs Auction) In most cases, the lender that foreclosed on the property will bid the exact amount of the mortgage they hold on the property - seldom will the bid a single dollar more. If you are the high bidder, you are required to put a minimum of 10% down immediately, with the remainder of the balance due within 10 days. If you don't pay off the balance within 10 days, you will lose any downpayment you put on the property, so make sure you are working with someone you can trust to get the job done if you need a mortgage, or have the cash to pay it off. In most cases, you are not allowed to enter the property before you purchase it. It would be a great idea to peek in windows and ask neighbors if they have been in the home recently to see what the approximate condition of the property is, but regardless of what you see or they say, you still could be setting yourself up for a huge loss. For all you know, there is 4 feet of standing water in the basement because the wall collapsed - or the home has toxic mold, or a huge variety of other disasterous issues. Don't get me wrong - you can get a great deal (the most recent one I closed was purchased about $60,000.00 less than appraised value) but you can also get screwed (I had one in the past where my client purchased it for approximately 30,000.00 less than appraised value, and spend nearly 90k getting it habitable) so it's a horse a piece. I would not really suggest purchasing a foreclosed property for a typical first time homebuyer - you'd likely want to be a bit more savvy in the real estate industry, not to mention have a substantial amount saved up for unexpected issues that may arise. As far as finding foreclosed properties, checking with your local government offices (clerk of courts or register of deeds) would probably be the best bet, or there are sites out there that can help out. One free site that I know of is www.ushud.com - but I am not sure how helpful that site really is. In addition, check with reputable real estate agents in your area to see if there is anyone that specializes in foreclosed or distressed properties. If I can help any more or you have any more questions, let me know! __________________ I have an aura of reliability and good judgement. Just in case you were wondering...

07-20-2005, 10:56 AM	#3 (permalink)
DDDDave Addict Location: Sarasota	Do a search on foreclosure and you find several other threads on TFP re: foreclosure properties. Foreclosure properties are not for the faint of heart or pocketbook. As NoSoup has stated there are almost always physical problems with the properties. A lot of times people have sabotaged the properties because they are being thrown out. Unseen or unforeseen damage is the rule of the day. The rules regarding foreclosure vary from state to state. Any research you do needs to specific to the state where you intend to buy. Some of the caveats: A mortgage lein is not superior to a federal tax lein so do your research carefully to make sure the IRS does not have a levy on the property. After the sale on the courthouse steps and the ten days you have to pay the rest of the money, the documents sit on a judges desk. The 'foreclosee' has the right to come in and pay off the forecloser during that time period. So essentially you do not have a deal until the ten days are up and the judge signs the papers. You will find it next to impossible to get a title insurer to write you a title insurance policy under these conditions. No title insurance means no loan. You need to be able to pay cash. All the normal time frames mean nothing. Appraisal, not hardly. No survey, too bad. Termite inspection, nope. OK, so how is it that you hear about all these great foreclosure deals. The answer is you buy it from the lender after they have foreclosed and have cleared up the title issues and can deliver clear title to a purchaser. The forecloser (bank, typically) will have inspected the property. They generally do not fix anything but you will at least be able to inspect for yourself. The bank may offer some kind of financing concessions. They will have obtained a survey and a pest inspection. They almost always list these properties with a Realtor and your best bet is to find a broker who specializes in foreclosures and go talk to him. Most of the time the lenders are owed more than the value of the property and therefore will have obtained a new appraisal based on the current condition of the property. They will not tell you what the appraisal number is but the listing price is usually within 10% of the appraised value. The bank is not trying to make money they just want to recoup their losses. My best advice is to take a real estate attorney to lunch and talk it over with him. He will explain the state specific rules and can probably give you the names of a couple of Realtors who do foreclosures. Good Luck. __________________ I am just a simple man trying to make my way in the universe... "Go confidently in the direction of your dreams. Live the life you have imagined." - Thoreau "Nothing great was ever accomplished without enthusiasm" - Emerson

07-20-2005, 11:48 AM	#4 (permalink)
arch13 Loves my girl in thongs Location: North of Mexico, South of Canada	Wow, thanks for the responses everyone. I guess I'll be more specific about what I'm looking at here. Being in the design business, there are several city and state projects that are currently slated to begin within the next 24 to 48 months in the city I live in, Savannah. I'm a city dweller myself, and have never really ventured out into the suburbs since moving here last month to start a new job as an architectural designer. There are a suprising amount of properties in forclosure or listed in the paper for courthouse sale that are out by where a new highway is being constructed, and a few out on the main suburban feeder road leading back to the city proper that is about to have lanes added to increase capacity. These are all within 2 blocks of major artery roads, all of which are just begining to be converted to commercial along the artery roads. The point I'm heading towards is that I'm not interested in living in these. I'm interested in renting them short term, and selling them at a later date when commerical viability of the surrounding areas becomes a closer reality. The land they sit on may very well be worth more than the structure at some point. I'd want to be rid of these within 36 months of purchase, meaning that no bank is going to touch me with a 10ft pole I assume. I'm interested in what other funding sources are out there and what others experiances have been. Being an architectural designer, I'm fortunate enough to know what the future of some neiborhoods is in terms of public works, and I'd like to be involved in these areas. Can anyone recomend good books on this topic? Has anyone else purchased property this way? What else should I be looking at to get a better, braoder picture of what opertunities and pitfalls this entails? __________________ Seen on an employer evaluation: "The wheel is turning but the hamsters dead" ____________________________ Is arch13 really a porn diety ? find out after the film at 11. -Nanofever

07-25-2005, 07:01 PM	#5 (permalink)
DDDDave Addict Location: Sarasota	I still say take a broker to lunch and ask him. Preferably a commercial broker. You don't have any secret information. The things you mentioned are known to lot's of people but the spoils go the guy who can see, foresee and ACT. Don't trust your own judgement--test your ideas on other people in the business. Not loudmouth RE types, but people you trust. The broker will know lot's of people with money, and how to buy properties out of foreclosure. As I mentioned, the learning curve is steep, there is no need to go it alone. Don't try to make your first deal the 'big deal of the day'. My thoughts might be 'Why are there so many properties in that area in foreclosure?' Perhaps people don't want to live next to the new road. Question- Why will new people want to? Commercial property takes time to mature. Good Luck. You are on the right track. Take your time. Talk to a commercial broker. Let us know how it is going. __________________ I am just a simple man trying to make my way in the universe... "Go confidently in the direction of your dreams. Live the life you have imagined." - Thoreau "Nothing great was ever accomplished without enthusiasm" - Emerson

07-25-2005, 11:26 PM	#6 (permalink)
Hardknock Republican slayer Location: WA	I'll say this.... There will be plenty or forclosed properties to purchase. And you won't have to worry about their condition. Just wait a couple more years. Maybe less. When this bubble bursts, these people who are plunking down 500K for a 1200SQ house in LA will be screwed when the interest only portion of their mortage runs out and the rate skyrockets, and their payment doubles. Alll you have to do is find some in some newly construced complex.