questions about foreclosed homes

Factual Questions
1

  1. Is there a way to find foreclosed homes without paying for the listings? (I assume this is all public record, but spam emails and websites I’ve seen all require a fee for sending me a list).

  2. If I find a foreclosed home I like, how likely is it that I would get a great deal from the bank? (will they sell for a huge discount to get the property off their books, or will they only be willing to sell at the price that the outstanding loan reflects, or is it all a matter of each case being individual? I’m looking for a usable rule-of-thumb here.)

  3. If I buy a 1 million dollar home for 500K, will the house be reassessed at the new sale price, reducing its property taxes (again, if this is on a town-by-town basis, I’d like to understand that, also)

  4. Are these homes usually damaged by the former owners, to point where purchasing them is much riskier than a normal home purchase?

I realize many of these questions are potentially site specific, but if any answer can be generalized, that would be a helpful start.

Thanks

2

I have no answers for the OP, but since I’m curious about this as well I’ll post to this thread so I can subscribe.

3

I just purchased a house and my experience was that foreclosed houses were just listed with real estate companies like anything else. I’ve heard that some banks even have their own real estate companies, though I don’t know for sure.

In any case, houses from all major real estate companies are listed through MLS, so when you search one database, you’re pretty much searching them all except for the wee cheap FSBO sites. Foreclosures aren’t difficult to find, unlike those lists tend to make you believe.

It was my experience that foreclosures are not a fantastic deal. They’re put on the market at about the same price as everything else similar, but yet tend to have more damage. Perhaps you can offer lower offers and have them be accepted, but there’s not much negotiating - you put in an offer, wait a while (much longer than usual), then the bank will accept the offer or counter-offer. They don’t negotiate much from there. Short sales are even worse and take a lot longer to figure out. Once it sells, it’s a massive rush to meet the bank’s schedule. (This is all according to real estate agents, so I guess take it with a grain of salt, but I can say I looked at foreclosure homes and never bothered with an offer.) Also, one of the cool things about occupied houses is you can negotiate for them to throw in stuff - I asked them to add a chest freezer to the appliances - and also negotiate that they cover repairs needed. I ended up getting about 5k in closing costs, appliances, and repairs thrown in, plus a year home warranty.

I saw a ton of foreclosures during my search. I was willing to do some work, but all of them were in bad enough shape that it simply wasn’t feasible. The house I ended up buying needed some updating and it’s still taken weeks to do a few projects (paint and recarpet one room, remove wallpaper on one wall in the kitchen and paint, add shower and tile to wall in bathroom). That was with six weeks! Sadly, people who get foreclosed on in general, though not always, aren’t the best at maintaining the home. They also have to move out in an awful hurry. Plus, a lot of the damage was likely intentional.

As to the reassessing thing, I would think this would be something you’d have to request (typically at a fee) from your city. Even then, you may not get it to be assessed for what you paid. Depending on what the next tax year brings, I may do that myself since my house was assessed at more than what I paid by a significant margin.

4

fluiddruid

Thanks for the input. I’ve just come back from a day of looking at homes, two of them in foreclosure. They were trashed inside and out. it’s amazing how people destroy a house they are being forced out of. I don’t know what I would do, but I would like to think I’d exit a bit more gracefully. One house had the upstairs water turned on and the flooding downstairs was so extensive, I wouldn’t touch it with a ten foot pole. And this was a house in a nice area. No thanks.

I couldn’t get the answer from my realtor about reassessment, but based on one day, I’m going to tend to agree with looking at occupied homes or homes that were emptied by choice rather than by foreclosure.

And here I thought I was looking at bargain time… not to be.

5

I don’t understand why people destroy houses they’re being forced out of. Do people really, really realize that they’re not still on the hook for the deficit in balance after the sale, and that their best interest lies in having the bank for selling it as much as possible?

6

HI,
I am a locksmith and for a good number of real estate agents who represent the back foreclosing on property, I am the man they call.
Most of the time I am the first person in the houses after they have been vacated by the former owners. Unless the Barbarians have been there. (the people who go and winterize houses. Who every now and then get there before I do. Why I call them Barbarians is best left for a pit thread.)

I have seen quite a bit in the past 15 years.

I have seen some houses where you were better served to burn the house down and rebuild.

I have been in a few where the house was spotless and all that was needed was a sign in the yard.

I have done half million dollar homes in really nice neighborhoods trashed and I have done 45K houses in the poor parts of town that were spotless and clean as new house.

Most houses fall in the middle of the two. If you call around and talk to different real estate agents you can find who handles most of the foreclosed properties in your area. Here in Madison County and Huntsville, I know of 8 people who handle almost exclusively foreclosed houses.

It is late, but if I can answer any more questions feel free to ask away.

Osip

7

Osip,

Thanks for the reply. I guess this opens up a whole new set of questions for me, and I hope someone can answer them.

The housing market is in the tank. We all know it. The economy is in the tank. The only reason we don’t hear the word “depression” is because of what that means to this country.

So, we go to a house. The realtor has told us that the owners have dropped the price 40% from their original asking price. OK, but I’m not an idiot. I did some research before I came to the house, and the market doesn’t support the house, even at the reduced price. Sorry. I know that sucks for the owners, but that’s one of the reasons I’m house shopping. The house is a nice one, but not in my mind worth what they are asking. At the original price, it’s a joke. It was sold at the top of the housing boom market, and at the time, it was in line with the neighborhood. No more. So, in going through the house, there was a ton of work that needed to be done. Not by vandals or by angry owners… just normal wear and tear, plus some odd choices by the original owners. They had two large dogs and decided that tile was the best flooring product. Every inch of the house was in tile. That doesn’t work for me, so that’s a huge expense. The realtor? “Oh, you are saving so much on the house, replacing the flooring would be no problem! It’s like free money, since you are paying so far below market value!” uh… what? Do they give realtor licenses out at the zoo? You, ma’am are an idiot.

Next house, a repo, owned by the bank. Now the bank, I assume, wants to get this off the books asap, and would be open to reasonable offers. This house was priced ABOVE market value for the neighborhood, even though it was priced lower than the original owners paid. The house was trashed. Windows broken, the flooding I had mentioned (and we are talking major flooding). The upstairs ceiling had fallen on the downstairs hardwood, ruining everything. I can’t even begin to imagine what it would cost to fix this house. It may make sense to wrecking ball it and start over. The freakin’ shingles were pulled off the roof! We noticed this before we got out of the car, but were assured that a deal was behind the door. Please.

I know realtors are hurting. But this isn’t the boom time, baby. You made your money like everyone else during the “have any house you want” sale that went on in the US. It’s over. Get a grip, and drop your expectations, the prices on these houses, and forget the last 10 years. The market isn’t there. People are losing their jobs by the thousands. Who do you think is going to spend this kind of money on a house that’s a handyman’s special?

Anyhow… osip, if you are still reading (or anyone else for that matter), who actually does the damage to these homes? By your message, it seems that it could be vandals just as easily as it could be the evicted owners. So, who is really on the hook for these damages? The american taxpayer I suspect. (why not? We are paying for everything else.)

Personally, I think people are just unwilling to accept that they are never going to get the money out of their house, and are going to continue to see it sit on the market. Realtors continue to try to artificially pump up the price to increase their ever-dwindling commissions. Banks aren’t as eager to get these mortgages off their books because the bailout money is coming. Everyone is in a fog and is deluded. It’s a bad cycle.

8

Your question has been somewhat answered, but I’ll share our experiences. And, of course, they are just our limited experience while looking for a home. We purchased a foreclosed property in October.

There ARE deals to be had - however in our experience they are listed through the MLS and the first day they are listed they are GONE because offers are submitted that first day and the bank works with the first offers on the table. We actually only started looking at foreclosed properties because we saw an outstanding deal (approx. 100k below market value, even in down time) on MLS the first day it was listed. We had our realtor meet us to look at the house, made an offer the next morning, and found out they already had a counteroffer out to a buyer.

We learned a few lessons from that, but still had the same thing happen again two weeks later. So we got smart and just subscribed to one of those websites, only because it lists homes that are in pre-foreclosure, and if you are willing to put in the work, you can find a home and follow it through the process (which is what we did) and have your offer in the day it is listed. Ours was foreclosed through a bank (listed on the sheriff sale info), but it was just sitting in limbo. So we contacted the bank’s REO dpt. directly and found out who the house would be listed through, and had our realtor contact them to let us know when it would be on the market. They did, we got in first thing, and made our offer . We had a number in mind we wanted to spend, we offered below that (and 75k below what they were asking). They countered us and we met 25k below their asking price, which was still an AWESOME deal - 4 acres, 3800 sq ft for 230k. Not in that bad of shape.

SO, there are deals to be had, but you have to be willing to work for it and do some leg work. The ones listed on MLS that sit are NOT the deals, as you have already found out.

We are in the process of finding out about the tax question you asked. We are able to dispute our appraisal, which we are going to do based on our mortgage appraisal and home sale price. We shall see what happens.

9

Thanks for this great experience, and congrats on your deal! I’m interested in hearing about the tax issues, so if you find out while this thread is alive, please post.

Perhaps subscribing is the answer. I have not seen a foreclosed home that has been on the market for any time that would be worth making an offer on.

10

shirts with no numbers

Can you tell me what service you subscribed to? I tried to send you a PM, but was unable to. If you’d like to send me a PM with the info or an email address where I can contact you, I would appreciate it. You can also post the info here if you are comfortable with that.

also, out of curiosity, can you give me the general area you were looking in?

Thanks!
SFP

11

Not a problem - we used Realtytrac.com, and now that I think about it, I don’t think we ever paid. They had a free trial at the time and we ended up finding out all the info we needed before that time expired. Out of all the ones we looked at, that seemed the most comprehensive and up to date, but YMMV.

We were looking in the northeast Ohio region, and as I said we bought in October. So, I don’t know what the bailout money has done to banks wanting to get homes off the books, etc. I’m sure it just depends on the bank that owns the property. Ours was owned by a bank that has since been bought out, so that may have played a factor into our “deal”.

One last thing to be aware of - our bank was a huge pain in the ass dealing with once they figured out it was a foreclosure we were purchasing. I actually believe I posted a portion of the saga on here, but just beware that you may want to ask what their procedures and policies are for mortgages before you get too deep into it. We almost lost our financing completely, with no other options because of closing dates being passed twice, due to their incompetence and stupid policies in that regard.

Good luck!

12

My wife and I in the process of purchasing a bank owned house. Sold two years ago for $585,000, our offer is $250,000.

We started last November. Most banks have a realter that they turn the reposessed houses over to to sell. They are also willing to let us know what is on the MLS. They have set it up so we get e-mails listing all houses at or below $300,000 in the zip codes around us. We look at the listing, cost, location, and facts and pictures. Every few weeks we descide if any are worth looking at and make a list. Or if one comes through that sounds good we call and set up an apointment to look at the ones we want. some are OK, some Good, some over priced, and some are run do not look back.

Some the banks list at a low price to get a lot of lookers and let the bdding begin. Saw a 5/3 listed at $300,000 sold for $450,000 and was still a good deal. We made offers on many but the bank got better offers.

Also I keep the print outs of all the houses we are interested in. Some times they relist at a lower price, so I go back and look at my notes.

The house we are trying to get first came on the MLS at $310,000. Look at it was a 3/1 nice house nice location, but no heat. It has had several price drops. When it hit $255,000 my wife suggested we relook and offer $250,000 with seller installing a new forced air heater. Now we are in the process of the little things. Will they install or do I with a credit?

As for the Taxes. If you sell a property with an increase in the assesment you will get a new tax bill in around two months. If it is a lower sale then it takes 6 to 9 months before the refund will be made.

If you still have questions ask.

I wanted to add my realter has told me normally on bank owned there is from $10,000 to $15,000 worth of defered maintenance that should be done.

13

If you’re interested in foreclosure sales, one source is likely your county courthouse. At least in my jurisdiction, there’s a bulletin board there where foreclosure notices are posted, which will state a time and place for the auction. Typically, the home is sold to the highest bidder for cash at public outcry. Most of the time, the bank is the only bidder, and they bid whatever amount is owed on the house, then fix up the house for resale. The “auction” is usually right outside the courthouse door. The trustee will read the notice, nobody pays any attention, and there is no real competitive bidding. I once made a bid of $10, just being devilish. The guy doing the sale laughed, announced his bid of $80K, and I was done.

Those same foreclosure/auction notices are also usually published in the classified section of the local paper, under “Legal Advertising” or similar heading.

14

Try this new site —> http://www.propertyshark.com/

15

I think some folks upthread have at least mentioned the distinction between foreclosure sales and foreclosed homes. In most jurisdictions, foreclosure is a multi-step process. I’ll simplify: The mortgagee forecloses on the home, which requires some procedural steps and notices to the mortgagor. Eventually there is a foreclosure auction. Typically the company that holds the mortgage bids the mortgage amount and takes the property. In some cases there is a redemption period. During that period, the mortgagor can pay the buyer whatever it paid, plus interest and certain expenses, after which the mortgagor owns the property. At any rate, once the redemption period expires, the mortgagee owns a property that it previously held a mortgage on. These properties are called REO (Real Estate Owned) properties.

It’s true that these properties can be overpriced, and they are often damaged or gutted. Not all of them are overpriced though. If the property is insured through HUD, the agency pays the mortgagee for the home and liquidates the property through its M&M contractors (Management and Marketing). HUD’s stated goal in liquidating these properties is to get rid of them like they were on fire (ok they didn’t exactly say the fire part) but they try to [del]dump[/del] sell them within 30 days. Because the properties are literally priced to sell, they are frequently listed well below market within a month of being placed on the market. You can find listings of these properties on the local M&M contractor’s website. Here is a list of M&M contractors: http://www.hud.gov/offices/hsg/sfh/reo/mm/mminfo.cfm

16

I’ve reached the conclusion that the only safe assumption about a real estate agent is that this person knows how to figure a commission and cash the check. Anything you get beyond that in the way of knowledge, honesty or actual help is a bonus.

Certainly there are conspicuous exceptions - I’ve dealt with some - but there are enough brainless scumbags out there that it’s foolish to assume anything but the worst.

17

I was looking at houses in the last few months and I went to a few foreclosures. None of them were in very good shape, but all of them well below market value. However, one in particular was unique.

Evidently the former owners either had their power turned off or decided not to run the heater. Instead, they ripped all the wood paneling off of the walls in the basement and burned it. In the middle of the basement floor. They thoughtfully cut a large hole in their wooden floor directly above the fire pit to let the smoke out. So there was a large hole in the living room floor as well as smoke damage to the ceiling.

18

A lot of them are probably too angry to be thinking about what’s in their best interest. Or they might feel that the bank has done them wrong, and want revenge. Humans are also known to play the “if I can’t have it, nobody can” game.

19

This article might help. I happened to catch this bit on the Today Show a couple weeks ago.

http://today.msnbc.msn.com/id/28318878/

20

  1. In many states, the deficiency is uncollectible or impractical, especially if the mortgagee forecloses the fast way. http://www.simply-foreclosures.com/resources/procedures.htm Even the linked chart paints a rosy picture. For example, here in Michigan, it says getting a deficiency judgment is possible and practical. While technically true, the mortgagee has two choices–non-judicial foreclosure, after which they’ll have to file suit, and the mortgagor can argue they sold the property for less than market value or judicial foreclosure, which takes too long.

  2. Sometimes its not the resident trashing the place. They abandon it and it remains unsecured and gets vandalized.