I actually did that in the past, not sure it is so easy any more...
...a dozen or so years ago I bought run down house in a nice area that way. The turn around, or period I had my cash tied up, was a little over 90 days AFTER I was able get the title clear. Depending on the circumstances of the auction / trustee sale the title might be clouded for quite some time.
For these reasons I woukd be very cautious. Further, the tolerance of lenders to do cash out refi, even at only 80% or less of purchase price, will STILL be driven by an appraisal, which, in areas with many foreclosures, (like most of Nevada)could still come in too low for you to recoup even 80% or your cash.
If your dough is currently sitting in some under 2% savings account the purchase MIGHT be ok, but if it earning good dividends elsewhere and you are buying the house as an investment this might not work out all that well...
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