questions about foreclosed homes

oh, and

  1. They’re very often broke to the point of being judgment-proof, humiliated, demoralized, mad at the system (which took their house away), and probably mad at the mortgagee (despite the recent talk of foreclosure prevention, from what I’ve seen they still are not willing to do much, and they will often refuse to discuss any sort of payment plan that doesn’t bring the borrower current in a month or two even if the borrower has a good reason for getting behind (lost job, dead spouse, divorce)). While the treatment they receive usually complies with the rules (I’m not trying to paint mortgage companies as evil) the response is pretty predictable.

That may be about to change. Obama’s talking about amending the bankruptcy code to allow judicial modification of mortgage contracts. As a poverty law guy, I think that’s a damn good idea.

I have to say, from what I have seen and figured out thru curiosity and observation.

Of the houses that were damaged and vandalized. 40% seemed to be owner induced damage. Based on no visible evidence of a break in. The rest could be vandals breaking in for a party house (mostly kids looking for a place to drink and screw) or a combination of both.

If the house was lost because of a divorce making it financially possible, there is a better chance of damage. Houses that were lost because of medical bills making the loan impossible to pay tend to be in much better shape.

Hope that helps

Google lender’s name plus REO

http://www.downeysavings.com/bank-owned-properties

Not all REO’s get on MLS, and many real estate types don’t like to do REO’s - very little money in it for them.
In CA, the property is assessed at the sale amount - check your area.

Some are trashed (the garden hose in the crawl space is my fav so far). Not only to the departing owners take it out on the house, theives go for the copper (pipes, wire, and, especailly, air conditioner coils. (China is building a new power plant every 10 days (so I saw). Hence the demand for copper.
Mostly, the problem is simple deferred maintenance - if you can’t make the mortgage, you probably can’t afford a new roof, floor, cabinets, etc.
If you can use a level, drill, chalk line and a few other common tools, you CAN install a kitchen - it is patheticaly easy (and use 3/4" plywood covered with ceramic tile for a counter - much nicer, and easier than foirmica).

Look at it this way - you WILL, sooner or later, replace the floor covering, wash the walls, paint, etc. If you do it when you first move in, you save a ton on the purchase price, you save more in lower property tax. Plus, doing it while you’re as young as possible beats the hell out of trying it when the joints and muscles no longer work all that well.

So - find something with a solid structure and lots of little “uglies” needing a day or two of work each- it is MUCH cheaper than a “move-in ready” nice and spiffy place. 20 years from now both it and the fixer will have needed the same work. The person who bought the spiffy one is going to be 20 years older, and maybe not so able to do the work.
If you have the money to hire all the work, the fixer is still the better deal (you will need to put up with the mess) - you may or may not pay less (if you know who/what to call, you will save), but you WILL get exactly what you want, in exactly the color you want, and may well not get re-assessed (YMMV) etc.

Note to all: REO’s are (yeah, here comes the "gotcha- I know one…) all sold “as is, where is; no representations, blah, blah, blah” - if you trust yourself to inspect, you’re set - otherwise hire an inspector. NOTE: an appraiser is NOT an inspector - he/she may note code violations, but will not dig around the foundation looking for bugs/rot/inadequate structure (I’ve seen some jewels!). The air conditioner doesn’t work? The roof is rotted? Foundation is sinking? It sucks to be you, 'cause YOU are the one to fix it. The bank does not care about your problems

C’mon - don’t tease like that. I just saw a notice on a kitchen counter from the “winterizer” - it was actually signed!. I thought that was over the top, but what other stunts do they do? Do they really drain the traps? If so, I was a bad boy…

As someone who’s just bought a foreclosed home, I can answer some of these;
1; yes, you can find listings for free, but I never did it that way. I used my regular realty sites.

2; You won’t get any sort of deal with the bank. The price they put out is the price they want. In their mind they’re already discounting the price and have no incentive to sell the property off quickly. Oftentimes they don’t even know what the property’s condition is. The bank’s realtor gets a notice that a property’s been foreclosed, and they list it. Most of the houses I saw had only exterior shots listed, meaning they didnt’ even go inside!

3; the house will be appraised by the appraiser at whatever the market value is. If you’re buying a home for a dollar, but it appraises at 500k, then it’s worth 500k. In my case, I paid 164k, but it was appraised at 170k. A year ago it appraised at 259k.

4; They’re usually not damaged, per se, especially in this economy where it’s not just ne’erdo wells that buy homes, but often times they’re not clean. It may take a day of housecleaning to get them ready but it’s not like maliciousness happened. Also, my home was unlived in for 10 months and a basement window was broken out. The homeless have a habit of breaking into houses to sleep in to stay out of the cold as well.
Fluiddruid has the right idea, my experiences were similar. I did see a few trashed houses, but then again I was looking specifically for a fixer upper. As for them being intentionally trashed, how would YOU feel if you were forced out of your home? Especially for someone else to live it? YOu would be angry, feel betrayed (yes I realize that it’s because they didn’t pay their mortgage, but humor me here) and like you’re being turned out onto the street. Why would you want to do any favors for someone who’s quite literally making you homeless?

Just a note on property tax assessment – the procedure varies widely from state to state, and possibly even within a state.

In CA, for example, when a house is sold it is assessed at the sale price. (Though there may be an exception if it’s not an arm’s length transaction, e.g., a parent sells his kid a million dollar house for a dollar.) The maximum assessment increases 2% per year unless improvements are made to the property or there’s a change in ownership. The assessment can be reduced if the value of the property goes down and can be increased to as much as the maximum assessment if the value goes up again. You can ask for a reassessment, but the county assessor may do it automatically. I think some county assessors are more proactive in this regard. Of course now there’s a big backlog as so many homes have declined in value.

This is my recollection, anyway. This structure is a result of proposition 13.

Based on my observations, the major problem with buying a foreclosed home is the paperwork created by the lender. It can take months to years for a lender to get around to agreeing to sell a foreclosed home. This is, in my opinion, a more significant factor than the above. Most of the questions come down to a measurable amount of money. One can find out what the future tax on a piece of property is and it is just a number in the calculation. Dealing with the paperwork OTOH, is an unknown.

As part of my job, I inspect foreclosed properties in Ohio.

As has already been indicated, the condition of the homes can vary immensely. I’ve seen everything from spotless houses to rat-infested, moldy shitholes. I will add that the condos I’ve seen tend to be in better shape than the houses, as everything outside the unit is still being maintained, so that might help.

Here’s a site from the company that handles our foreclosures. They do a good job securing the properties, so I hardly ever see interior vandalism. This site even has a Property Condition Report for each foreclosure, which is extremely helpful.

http://www.nhmsi.com/

I find this point intriguing. I know from my end of the business (I was involved in foreclosure defense when I worked at Legal Aid there; now I monitor Ohio foreclosures as a small part of my job) that Ohio requires judicial foreclosures, and those can take a long time. (HUD says 12 months is reasonable here http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4330.4/43304x7HSGH.pdf ) Do you have a feel for how many properties are abandoned *before *the contractor can get access to them or for how long? From what I’ve seen of the work done by HUD M&M contractors, the vandalism actually happens in that gap.

Thanks all for the great replies and information. I am much more informed that I was last week, so things should go a bit smoother. I never thought a house that reached the MLS system would be a potentially weaker candidate than one that is in the process of being foreclosed on, but based on these stories, I can see where that makes sense.

I’m guessing the only true “bargain” would be a corporate house that a company just wants to move. It’s probably going to be well maintained, fairly clean, and I wouldn’t be dealing directly with a bank.

I have also noticed that model homes (when available) can be good buys, especially since the builder uses upgraded materials throughout the house to make it look great to the people who come by and visit.

No you can get a deal with a bank. They want to move the house off the books. It all depends on how long the house has been on the market and if there are anyother offers.

Ours was on the market over 4 months no offers. Started at over 300K, dropped in stages to 254K. Our offer is 250K with 6k crredit in closing costs. We have had some back and forth last ademdum 250K, 4.5k closing cost credit, and seller installing a forced air heater. We have the word that the bank will sign off on the offer. The GRM on this house should be around 11, so it should positive cash flow right at the start.

Some other houses we looked at the bank would not move a bit, but they did get other offers.

OH yes the bank only knows what the realter tells them. Normally they do not see the house. All the disclosure papers were stamped exempt forclosed property. And the disclamers we had to sign stating that the seller does not know the condition of the property.

is getting the house before it is foreclosed. I think the Investors Business Daily list houses in default. Send some post cards to people. Maybe, they will let you take over their payments or something like that.

Good luck.

That wouldn’t work so well if they’re upside-down on the house (which is the problem a lot of people who lose their houses to foreclosure have). You would then owe the bank what the house cost when they bought it, which might be more than it would sell for now.

In fact, why would they lose their house to foreclosure if they weren’t upside-down on the loan? If you can’t make your payments and owe an amount equal or less than the value the house would bring on the current market, the obvious thing to do is to sell the house the normal way.

In a perfect world, you’d be able to turn the property over for fair market value quickly. In some places, like Michigan, not only are real estate prices depressed (which means you might be upside down) but real estate sales are very sluggish. There might not be time to sell the property before it is lost to foreclosure.

No, I don’t know. I only get them after they’ve been secured and are undergoing monthly M&M maintenance. I don’t do the Cleveland area, which is probably worse, and I actually get to pick which properties I see so I can avoid the most dangerous neighborhoods, which are more likely to be vandalized (except yesterday - I saw one in an absolutely awful area - but the property still hadn’t been vandalized).

After the Barbarians are thru I have noticed in this area (North Alabama) they, will tape a notice at each sink, commode, and water heater that the property has been winterized. The notice always gives the Barbarian’s name or at least company information. They are supposed to pour anti freeze in all the drains, drain the hot water heater, turn off all breakers and run compressed air from the street main towards the house.

I call them Barbarians since I have actually seen them do more damage trying to get into a house than some vandals. When they replace the locks they use some of the cheapest locks. I consider them mouth breathing scum (not Mouthbreather the poster who is a personal friend.) Since this is not the pit I shall refrain any further comments about those who do this job here in my area.

No big deal. I was just curious.

Well, when you have a couple of hundred thousand dollars worth of debt, that you’ll probably never be able to pay off, what’s another few grand.
And regardless of whether you’re losing your home because of job loss, illness, divorce or sheer fiscal irresponsibility the fact remains - if you’re getting kicked out of your house, you’ve hit rock bottom and at that point you probably aren’t thinking rationally anyway.
I know if I were losing my house I’d probably want to go out in blaze of glory too -putting cigarette butts out on the carpet, spray painting the walls with obsenities, carting away as much copper tubing as I can. And you don’t even want to know what I’d do in the bathrooms.

The trouble here is that you’d be committing crimes to which you might well be linked, and at a minimum you’d have the eventual new owners (who will inevitably be the ones most inconvenienced by your actions and will certainly know your name) forever saying things like “Worthless scumbag? You want to know who’s in the worthless scumbag hall of fame? Let me tell you about joebuck and what he did to this house, that we had to clean up.”

[Please note that this is hypothetical - I am not calling you these names.]