buying foreclosures/bank owned.... (disclosure, auctions, foreclosure, 4%)

[shadow91]

Is it a good idea to buy a foreclosure/bank owned property? I want to buy a home in my town but can't afford most. I see on realty trac about auctions and was wondering if anyone on here has experience with this sort of stuff. Any help would be appreciated.

[Captain Bill]

Originally Posted by shadow91

Is it a good idea to buy a foreclosure/bank owned property? I want to buy a home in my town but can't afford most. I see on realty trac about auctions and was wondering if anyone on here has experience with this sort of stuff. Any help would be appreciated.

Auctions may or may not be the best way to buy because there is the emotional factor that can trend to drive the price too high and cause you to overpay.

You need to know how to determine value of the homes before buying a bank owned property. Some may be bargains at listing time, and others may not. Some banks will negotiate, others will hold tight.

You may wish to look for a realtor in your town who has experience buying from banks or listing bank owned properties. Outline your price goals and the realtor will help you find the home you're looking for. When you're looking for that bargain, it may not be your dream home. You may have to do some trade offs.

To get the dream home and the dream price at the same time is difficult.

[pghquest]

Originally Posted by shadow91

Is it a good idea to buy a foreclosure/bank owned property? I want to buy a home in my town but can't afford most. I see on realty trac about auctions and was wondering if anyone on here has experience with this sort of stuff. Any help would be appreciated.

Primarily for the auctions you need cash, but your question about bank owned properties have nothing to do with auctions. Once a bank owns the property they do not go to auction unless they are properties that the bank has had a hard time to sell.

Bank owned properties are good buys, but they require a standard mortgage (or cash). Be prepared to be patient, but the patience is a virtue as you get some really good deals out there.

[bigdave01]

What is the difference between a bank owned property and a foreclosure. For example, they list foreclosures on trulia, and give a price. Is that price the starting bid at an auction or what?

Thank you

[Bazzwell]

Bank owned properties can be an excellent buy. They can also be a nightmare of epic proportions. Take heart though, there is middle ground to be found if you're careful. Here's a few things to keep in mind....

Chances are they've been empty for some time with no heat, no air and no care. Vandalism could be present with copper missing, furnaces stolen, interior damage, mold and so on. They may need extensive updating even if all the components are present. Then again they might need nothing except some elbow grease. Each one is different.

They are sold as-is. What you see is what you get, take it or leave it. There is no disclosure statement from the bank. They've never been there so how can they tell you when the roof was put on or does the basement fill with water after a hard rain? You'll have to figure that out, usually with the help of a home inspector. All utilities might not be present so a complete report could be impossible.

Here's one catch to keep in mind. You probably won't get a loan if the house isn't able to be lived in right away. There is an FHA 203K loan available for purchase and rehab but you'll need a credit score of 620 or better to get into it. Otherwise it's cash money.

If the house needs repair, can you do it? Can you put a roof on, install wiring, do plumbing? If so, great, you'll save tons. If you don't and have to call in pros, that's big money. Do some figuring and caculate in the cost of repairs so you don't offer too much.

Guess I'm telling you to be prepared. Don't rush into anything and be honest about what you can do. Oh, auctions. As another poster said, they're the last resort for properties that have outlived their shelf life and the bank wants to dump.

[Gretchen B]

Originally Posted by bigdave01

What is the difference between a bank owned property and a foreclosure. For example, they list foreclosures on trulia, and give a price. Is that price the starting bid at an auction or what?

Thank you

You're not alone, bigdave, in thinking that foreclosures, bank owned properties are a bit confusing. They are! Add to that the hype about bargains to be had on foreclosures, and everybody's wanting a piece of the action. And while there might be some REAL bargains out there - it's definitely a buyer beware scenario . . . and the deals are better in some parts of the country than others. But here's the typical stages of a house in foreclosure:

1. Owner gets behind on mortgage payments. Oftentimes the owner has purchased the home at the height of the market with 100% financing and possibly an adj rate mortgage and can no longer keep up when the ARM resets. Other times an owner may be behind because of a job layoff. He has maybe moved to another state with a new job and has simply "walked away" from his house.
   
2. At this stage, some owners will try to sell their home. Problem is, most times they can't sell their homes and clear enough to payoff their mortgage and back payments, liens, back taxes. This would be the "short sale" phase, and a lender would have to agree to accept less than what's owed on the house. While some lenders will agree to a short sale, others will not. Oftentimes a buyer won't receive an answer from the lender for 60 days or more.
   
3. If the house is worth more than what's owed on it, then a buyer might purchase it at this stage -- however somebody (either the buyer or the seller) will have to be willing/able to catch up the back payments, fees, taxes, etc to bring the house out of foreclosure in order for it to be sold. Obviously an owner who's in default on his mortgage won't have the means to do this, and it would be very costly to the buyer to do this.
   
4. The house is finally slated to be auctioned off "on the courthouse steps" as either a Trustee's sale or a Sheriff's sale. A buyer could purchase the house at this point. However, most banks have a pretty high reserve set or will keep the house vs let it sell too low. A buyer would need to have cash to buy at the auction, and he also runs the risk of major problems with condition and title. He'll be purchasing the home "as is" with no inspection period and he may find that he'll have to pay back taxes or other liens in order to obtain a clean title to the house. So it's not without risks to purchase at this point.
   
5. The lender keeps the house and now owns it. The lender cleans up any title conditions. A buyer who purchases at this point is still purchasing "as is" but retains the right to inspect (and cancel the contract if the inspection shows major condition issues). At this point, a buyer MIGHT get a bargain, but that's not always the case. Sometimes lenders list their properties at or above market value, hoping to recoup some of their losses. Eventually they lower the price when there's no offers, but this might take them a while to figure out they're too high. Other times (and in areas with lots of foreclosures) they'll price aggressively at the start and will look at any reasonable offer. The main thing here is to work with an agent that really knows the market and whether or not this is a true bargain. Also, you need to get some good estimates on any repairs that need done. Sometimes what looks like a bargain really isn't.

Hope this helps. And keep in mind that even foreclosures will be location specific. What I've related is the general scenario for foreclosures in my area.

[ymbd]

I bought a REO(bank owned home) in March that sat empty for about 6 months. Thankfully after the inspection, we only had minor things to fix. Mostly cosmetic work, carpet cleaning, painting, cleaning cabinets etc. Oh yes, we had to purchase a stove. But, some of the REO homes we went to see, OH MY GOODNESS!!! Where to begin:

water damage
rat/mouse infestation
TRASHED
spoiled food in home after at least 6 months on market
one mold house(the previous owner broke the pipe in the bathroom and the water ran through the walls and caused a HUGE mold problem)
furniture abandonment(nice things too)
overgrown grass in backyard(snake potential)
holes in walls
broken windows etc

I think we lucked out. The bank (Wells Fargo) accepted our first offer and also paid for our title insurance, 1 year warrenty and 4% towards closing.

Good luck to you.

[renelus]

The information here is very interesting. How do you go about getting a list from the bank? Can you get it online?

[Lisa Long]

Hello,
I am an active real estate for the last 29 years. I know that there are lots of internet sites touting foreclosures. However, the lenders want to sell the homes so they are listed on the Multiple Listing Service; in my case, the Northwest Multiple Listing Service. Any agent may sell the home. We have an agent in our office who solely lists foreclosures he receives from a lender source.
Also, most banks and savings and loans send their foreclosures to their servicing department so technically you and your agent would be going through the agent who listed the property and he or she would be dealing with the servicing department. I can tell you that it typically may take a week to get an answer from them, however, I have had it take much much longer. It all depends on how busy they are.
Further, the home is sold "as is" but you can do an inspection. The offer will be much better received if an inspection has been completed prior to making an offer. Also, you need to be preapproved. Normally the offers do not differ much from the asking price. For example, sometimes a foreclosure sells right away. If the price is too high, eventually the price will be lowered. If it does not sell in a reasonable time, the price again will be lowered until it sells. I hope that this has bee of some help.

Lisa

[Lisa Long]

Contact a real estate agent in your area. They can do a search of the Multiple Listing Service for bank owned properties.