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Negatives or Positives in Buying Foreclosures in Today's Distressed Market ?

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veracious
Established Contributor

Negatives or Positives in Buying Foreclosures in Today's Distressed Market ?

I would like to know if the minimal price difference between  private homesellers and Bank REO properties are worth the extra effort.

 

In today's market, all the available short sales, pre-foreclosures, Bank REOs,  etc., aren't available for sale or listed on the MLS.

 

The big banks are "holding a portfolio of distressed homes" so as not to saturate the market.

Aside from the unethical practice of some realtors, with their "pocket listings" and the Big Banks holding properties

how can I ever find the complete list of  distressed properties for purchase.

The prospective home will be my principal residence as a first time buyer.  Should I even consider this strategy?

Any thoughts or suggestions?

 

Thanks for any replies.

 

_________________________________________________
"You may never know what results come of your actions,
but if you do nothing, there will be no result" ~ Mahatma Gandhi
Message 1 of 10
9 REPLIES 9
ShanetheMortgageMan
Super Contributor

Re: Negatives or Positives in Buying Foreclosures in Today's Distressed Market ?

The threshold of price difference to make it worth pursuing a foreclosure over a regular resale is up to the individual buyer.  One buyer may think very negatively about bank owned inventory, perhaps they were hurt by a big name bank, and want to help out the "little guy", making their required price difference much greater than someone who is indifferent to the type of seller.

 

However in my market every short sale is listed on the MLS, otherwise very poor chance of finding a buyer.  Foreclosures are either listed on the MLS, or if HUD or Fannie or Freddie owned, they are listed on their websites (so you may be looking at a HUD home, not even know it, and wonder why it isn't on the MLS but it's at HUDHomeStore.com instead, etc.).

 

http://www.realtytrac.com/home/ purports to have the largest database of foreclosed homes, but I don't think they list pre-forclosures or short sales, only bank owned inventory.  When you say "they aren't on the MLS", you don't mean the websites that consumers can search for homes on the internet do you?  You mean you are working with an agent who is a member of the local MLS and is sending you every listing without any filters, right?  That is the only way to insure you are getting the entire MLS, no filters... you may get hundreds of emails a day, but you can't say you never got sent a certain home that is on the MLS.

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Message 2 of 10
veracious
Established Contributor

Re: Negatives or Positives in Buying Foreclosures in Today's Distressed Market ?

Thanks Shawn, for the quick response to my question.

 

The MLS  database I'm searching is HAR. I'm all set to move to this area. Either Harris or Montgomery County.

 

Foreclosures aren't as plentiful there, but I suspect that all the listings aren't being shown since their MLS database

is open to consumers.  The property taxes are high in the state, so I was hoping to get a home below market price and

petition the assessor for a tax bill which is reflective of the lower price I paid.

My thinking is that after homestead exemption and senior exemption within two years will allow us to get a better home

for a manageable mortgage amount.

 

Since I'm retired, I want an affordable mortgage.  My  income won't go up that much until I'm forced to take distributions

in the future.   The wife and  I are going to test the waters with a scouting trip in July. We will find a realtor at that time.


 

 ETA: spelling

_________________________________________________
"You may never know what results come of your actions,
but if you do nothing, there will be no result" ~ Mahatma Gandhi
Message 3 of 10
bcdudley
Regular Contributor

Re: Negatives or Positives in Buying Foreclosures in Today's Distressed Market ?

 

Just in my experoence at looking at homes for the last year, most of the foreclosures, Fannie, Freddie and Hud homes we looked at were trashed beyond simple repairs. I would guestimate that 90% of them had foundation problems with many of them being severe foundation problems. The houses all had electrical and plumbing fixtures removed, holes punched in walls, graffiti from the previous home owner painted on the walls and carpet if there was any, and I even came across one where the previous home owner had dumped several bags of cement to the plumbing and it had hardened inside the foundation. It was in the walls all the way up to the second story of every plumbing fixture in the house. The toilets were removed to make it easier to dump. The sellers agent told us confidentially that they had an inspection done from a previous potential buyer, but the inspector told them the entire foundation would have to be dug up and new pipes installed all the way to the street. Most likely the house would be demolished.

There may be some foreclosures out there that are good deals, but investors are snapping them up with cash offers before the average first time home buyer has any chance of touching them, much less going through the entire mortgage process. My dad does this as a hobby and he gets list of homes from banks months before they go on the market. He also buys them for $0.10 - $0.50 on the dollar for cash. Typically when people like that buy the houses, they buy in bulk of around 25 - 50 houses at once.

Again this is just my experience in my area. YMMV.

Good luck.


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Message 4 of 10
mauve
Valued Contributor

Re: Negatives or Positives in Buying Foreclosures in Today's Distressed Market ?

As much of a pain it is working on my new house, I'd like to mention that Freddie and Fannie both have a First Look period when only owner-occupants can put in offers. Maybe I should have offered less, but my house will be well worth it when it's done.  There were at least 2 other offers on my house by other owner occupants.  I had to take out a 203k loan - previous owner ripped out the kitchen and most of the items in the bathrooms, and there are various other issues.  I've had 3 people so far offer to take it off my hands (one of them is my realtor) if it gets to be too much.  I've had strangers stop to tell me that they wanted it but couldn't convince their spouse to sell their house and buy it...not every Fannie and Freddie house is destroyed beyond repair. 

 


@bcdudley wrote:

 

Just in my experoence at looking at homes for the last year, most of the foreclosures, Fannie, Freddie and Hud homes we looked at were trashed beyond simple repairs. I would guestimate that 90% of them had foundation problems with many of them being severe foundation problems. The houses all had electrical and plumbing fixtures removed, holes punched in walls, graffiti from the previous home owner painted on the walls and carpet if there was any, and I even came across one where the previous home owner had dumped several bags of cement to the plumbing and it had hardened inside the foundation. It was in the walls all the way up to the second story of every plumbing fixture in the house. The toilets were removed to make it easier to dump. The sellers agent told us confidentially that they had an inspection done from a previous potential buyer, but the inspector told them the entire foundation would have to be dug up and new pipes installed all the way to the street. Most likely the house would be demolished.

There may be some foreclosures out there that are good deals, but investors are snapping them up with cash offers before the average first time home buyer has any chance of touching them, much less going through the entire mortgage process. My dad does this as a hobby and he gets list of homes from banks months before they go on the market. He also buys them for $0.10 - $0.50 on the dollar for cash. Typically when people like that buy the houses, they buy in bulk of around 25 - 50 houses at once.

Again this is just my experience in my area. YMMV.

Good luck.




 



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Message 5 of 10
bcdudley
Regular Contributor

Re: Negatives or Positives in Buying Foreclosures in Today's Distressed Market ?

 

"I'd like to mention that Freddie and Fannie both have a First Look period when only owner-occupants can put in offers"

 

I agree that is the way it is supposed to work, but I don't think it always does. I have looked at the list my dad has and it has homes on it where the owner was just foreclosed on that day that he can bid on. Maybe they are not Fannie/Freddie houses, I don't know, but he gets them dirt cheap that way. He was trying to help me buy one through his group going that route, but the way it is set up, it is all managed through a company that handles the refurb and everything for them. They do not sell to their members to prevent them from abusing the system. They just pick the properties they want to invest in and bid, then the company takes over from there. The houses are from all over the country. You have to move extremely fast to get them. Most of them are gone within an hour after he gets the email in.

 

I never had time to even drive by a house and look at it, much less try to get a loan on one.


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Message 6 of 10
veracious
Established Contributor

Re: Negatives or Positives in Buying Foreclosures in Today's Distressed Market ?

@ bcdudley    Thanks for your insightful post. I'm aware that some realtors acquire listings pre foreclosure through the

BPO process. If this is the situation you've described, your dad is in an enviable position with his access to qualified contractors,

especially a nationwide network of contractors. If you have the liberty to describe or share the details with me I would appreciate

it tremendously.. You can PM a message if like.

 

My goal is to be knowledgeable about all aspects of purchasing my first foreclosure property with the intention of making it

a principal residence.  If I can become aware of serious investors who make available properties at a discount, I'd like to know

about it. 

 

Thanks in advance.

_________________________________________________
"You may never know what results come of your actions,
but if you do nothing, there will be no result" ~ Mahatma Gandhi
Message 7 of 10
veracious
Established Contributor

Re: Negatives or Positives in Buying Foreclosures in Today's Distressed Market ?

 

@ mauve   Thanks for the heads up on Freddie and Fannie.   I'll definitely look into those leads.

 

I had not heard of the First Look period.

 

 

Thanks again

_________________________________________________
"You may never know what results come of your actions,
but if you do nothing, there will be no result" ~ Mahatma Gandhi
Message 8 of 10
bcdudley
Regular Contributor

Re: Negatives or Positives in Buying Foreclosures in Today's Distressed Market ?

I honestly don't know that much about it. I have seen the lists of homes that he gets in his email and I know he has to respond within minutes to get the good ones. I also know he has to purchase homes in lots of 10 or more depending on the class of the homes and the pricing. He cannot just purchase a single home. It is more of an investment group where people pool their money together to purchase homes in bulk, usually hundreds at a time. I know you have to have an invitation from another member to even be able to be considered and then they review all your financial information and stock portfolios and whatever else they want to decide if you are able to participate.

 

From what he has told me he will invest $50k to $100k per house, then spend another $50k to $75k to refurbish the home, then turn around and sell them within a month or two for $250k when it should be priced at $300k. Different houses are priced differently of course, but you get the idea of what kind of system it is. They use cheap materials to keep the cost down and sell them well below market value to move them fast. There is significant risk involved when buying houses site unseen and he does loose money on some of them, but he usually is able to come out on top for the majority of them. He almost never sees the house from teh time he buys it until he sells it.

 

I honestly don't know much else about it other than if you have the find of money to do that kind of stuff, they will find you.

 

Good luck with your purchase.


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Message 9 of 10
veracious
Established Contributor

Re: Negatives or Positives in Buying Foreclosures in Today's Distressed Market ?

Thanks for your reply ,bcdudley.

After hearing the details you described, it reminded me of why I've recently noticed a ton of houses on the market

that are vacant with no staging and are immaculately clean. I now realize many of those homes are properties

being sold by absentee investors.

 

Upon reconsideration, maybe foreclosures and investor owned properties aren't for me because an investor nor a bank foreclosure

will give any disclosures about the  property.  Far too often even sellers living in the homes are plenty dishonest  and evasive

about disclosures.  Every time the subject of disclosures is discussed with sellers, nobody knows nothing bad about the property they

are trying to sell.   LOL .      Thanks for the well wishes.    

_________________________________________________
"You may never know what results come of your actions,
but if you do nothing, there will be no result" ~ Mahatma Gandhi
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