Foreclosures

roybean · 09-08-2006, 01:54 PM

Ok, here's what I want to know; I think I've read or somebody told me that you still have to qualify for foreclosures just like you would if you were purchasing the conventional way. Is this correct?

ilovemydogs · 09-08-2006, 02:09 PM

Quote:

Originally Posted by roybean

Ok, here's what I want to know; I think I've read or somebody told me that you still have to qualify for foreclosures just like you would if you were purchasing the conventional way. Is this correct?

Here all you need is a letter of credit and you have a cahsiers check for I believe 20% of what they think it is going to go for up front BEFORE you are allowed to bid.

I have been to a few foreclosures and what has happened in half of the cases are there are probably 5 people there including the bank and the auctioneer and the owner usually comes up with the money to end the auction.
The other sales are done within a minute and the thing is a done deal.
I bought a house this way for my brother,and we did not have to do any pre approval,but perhaps the letter of credit is that and more?
ILMD

jlynn · 09-08-2006, 02:51 PM

Quote:

Originally Posted by roybean

Ok, here's what I want to know; I think I've read or somebody told me that you still have to qualify for foreclosures just like you would if you were purchasing the conventional way. Is this correct?

Usually yes.

Hedwig · 09-08-2006, 03:18 PM

If it's an FHA or VA foreclosure (which means it's being sold by HUD), it won't be sold at auction. Real estate agents sell them in most states. Some agents don't want to mess with them because the commission is set by HUD and usually less than they can get from a market house. The price is pretty much set, too. It's the balance of the foreclosed mortgage plus some fees that they're allowed to add.

These houses are purchased just like any other. My house was an FHA foreclosure when I bought it over 20 years ago. You go to a mortgage broker or bank, just like you would for a regular house.

Make sure you pay a home inspector before you put in your offer. Many foreclosures need a lot of work because people haven't kept them up, since they knew they were going to lose the house anyway. In my case, the couple divorced and didn't want to be bothered with selling the house, so they let it be foreclosed, and it was in pretty good shape.

You normally can't get an FHA or VA loan on a house that is being sold by HUD because it might be in bad condition, and they don't want you to walk away and they're stuck with it again. But after a year you can refi to an FHA/VA loan.

I don't know much about non-HUD foreclosures.

centex · 09-08-2006, 04:50 PM

Hedwig's comments about the HUD homes are particularly true in this area...there is some real crap on the lists. Lot's of little starter homes that may also have back taxes due on them. Every now and then, there is a potential gem to be had, but they are few and far between...

jlynn · 09-08-2006, 05:01 PM

Yeah, what Centex said - most are starter homes (thus the FHA guarantee), and my experience as a RE Agent showing them occasionally, most of them had very expensive repairs needed - such as new roofs, or foundation issues. Too much for someone in a starter home to spend, so they end up letting them go.

centex · 09-08-2006, 05:39 PM

Quote:

Originally Posted by jlynn

Yeah, what Centex said - most are starter homes (thus the FHA guarantee), and my experience as a RE Agent showing them occasionally, most of them had very expensive repairs needed - such as new roofs, or foundation issues. Too much for someone in a starter home to spend, so they end up letting them go.

Funny you would mention foundation issues...we have a lot of the starter sh*tboxes that the slabs cracked within the first year because the mass building efforts did not take into account the fact that some of the soils in this area have been measured as moving as much as 17" in a window of time.

As much as anything else, though, it was people that got in on the front end of the low interest rates, got an ARM and then couldn't keep up even when the rates only went to 3.5-4%. I'm expecting a nice flow of property in the next 6-8 months, some of which might actually be decent...in essence, the stuff that hits as the middle incomes get hit with the rise to the 7% range coupled with the tax jack that we saw in Travis County this spring...

Hedwig · 09-08-2006, 05:57 PM

I predicted this quite a while ago. I tried to tell some folks back in the CreditNet days that property wouldn't always go up in value, and I saw a decline coming in the next 3-7 years. That was about 3 years ago, and it's starting.

roybean · 09-08-2006, 06:02 PM

Seems like so much to learn you guys! So many ways you can get burned.

Hedwig · 09-08-2006, 07:23 PM

I never advocated the interest-only or low-introductory ARMs. They were a way for real estate agents and mortgage brokers to convince you to buy more house than you could really afford.

When rates are down, lock in the fixed rate for a long-term. I wouldn't refi if I couldn't get a 30-year fixed.

centex · 09-08-2006, 07:29 PM

Quote:

Originally Posted by roybean

Seems like so much to learn you guys! So many ways you can get burned.

Among the issues I have seen on more than one house were mold issues not properly addressed, obvious slab damage, roofing issues, physical damage to the property that has occurred while vacant, sheetrock that was damaged in multiple rooms, flooring completely ripped out, hottubs removed from the property, and water pipes that were completely rerouted in a questionable fashion using PEX.

Moreso than with any other type of listing, you really need to go through the house with a fine-toothed comb and know what you are looking at in terms of costs.

roybean · 09-08-2006, 07:52 PM

I have read that the foundation is the most important part of buying a home because it means that it is structurally sound, but on the other hand I know some people that bought into some new track houses. Come to find out that the contractors were using sub-standard materials to cut costs. After the houses were up and pretty much all of them filled with new residents, people started complaining about all kinds of stuff like mushrooms growing in their living rooms.

Another lady said she had a crack down the middle of her dining room wall that went from the ceiling to the floor. They used cheap carpet in the homes, some were promised new applicances that never came. When they got together to contact the contractor he had left the state.

I guess I better keep reading.

Hedwig · 09-08-2006, 08:19 PM

Never, ever, ever close on a house if you're missing something like appliances unless the seller puts the money in an escrow account with a neutral third party.

Give them a date by which the defect (appliances, something that needs to be fixed, whatever) is to be fixed, if it's not the money comes to you to take care of it.

And make sure that you have several estimates for the amount to be escrowed so you aren't left holding the bag.

ilovemydogs · 09-08-2006, 08:56 PM

Quote:

Originally Posted by roybean

I have read that the foundation is the most important part of buying a home because it means that it is structurally sound, but on the other hand I know some people that bought into some new track houses. Come to find out that the contractors were using sub-standard materials to cut costs. After the houses were up and pretty much all of them filled with new residents, people started complaining about all kinds of stuff like mushrooms growing in their living rooms.

Another lady said she had a crack down the middle of her dining room wall that went from the ceiling to the floor. They used cheap carpet in the homes, some were promised new applicances that never came. When they got together to contact the contractor he had left the state.

I guess I better keep reading.

Buy an ANTIQUE home as they are made very well.
Every home we have bought has been pre 1800,and we restored them all to their original condition and they are a great investment.

ILMD

roybean · 09-08-2006, 09:45 PM

And who's going to do all that work? I don't have time for that.

ilovemydogs · 09-08-2006, 09:54 PM

Quote:

Originally Posted by roybean

And who's going to do all that work? I don't have time for that.

You don't? It is time consuming but it is a labor of love for some just like taking care of an old wooden boat.

ILMD

Hedwig · 09-08-2006, 10:00 PM

I wouldn't have time, either, for something like that.

ilovemydogs · 09-08-2006, 10:05 PM

Quote:

Originally Posted by Hedwig

I wouldn't have time, either, for something like that.

My Mother loved to do all sorts of work on homes, and while I do not do any of the physical work much, I do do all the details and plans.
I guess I am just used to it as I have been restoring old homes for three decades now,and enjoy it.
Oh and centex and jlynn we even moved an old home down to Fort Worth now that was time consuming as I hated being away from home,but I had to get the colors and trim just right for the new owner,and the kitchen well it turned out fantastic!

ILMD