That's the first line of a NY Times column 10/16 worth reading.Â It relates the story of two unfortunate men who bought a home at a private auction (not sheriff's sale) only to learn later that the home they bought had a large unpaid first mortgage.Â Their $137,000 had bought out the second mortgage (same lender - Wachovia) but not the first.Â
The column also gives some examples of what happens to some homes when either A) the foreclosed owner is angry with the lender, or B) theives or squatters have had access to a long-vacant home.Â In either case, the damage can be both significant and unknown, since many times homes sold at foreclosure auctions have not been available for inspection, and in every case they are sold "as is".Â
Yours truly once showed a foreclosure in which someone had removed
2. water heater
So should you buy a foreclosed home?Â
First the term "foreclosed home" covers several conditions that may make the difference.
The safest way is to buy a home on which the foreclosure process has been completed, so is now owned by a lender and listed for sale by a local Realtor.Â This at least gives you the opportunity to have professional inspections that will put you wise to any issues that may need correcting.Â Typically lenders will not pay for repairs, but at least you can factor the cost of repairs into your offer.
Another way is to buy at a true "sheriff's sale".Â This is the traditional (and literal) sale on the courthouse steps.Â Here the risk goes up because you may not have had the opportunity to see the inside of the house or conduct any inspections.Â It may very well still be occupied buy the previous owner or a tenant.Â Eviction processes, sometimes mess and expensive, may take weeks or more.Â Finally, to buy at this sale, you must be a cash buyer.Â No "My loan is approved and the docs will be signed on Thursday".Â So this version is truly for the professional investor who 1) has the cash, and 2) is willing to accept the risks just metioned.
A third way, and which is apparently where the two unfortunates in this story bought, is at a "private" auction of foreclosed homes.Â Here one or more lenders have authorized a private auction service to sell homes which have been foreclosed.Â This is not common throughout the country so may not be available where you live, but in any event it deserves an extra measure of scrutiny.Â
The article isÂ http://www.nytimes.com/2010/10/16/your-money/mortgages/16money.html?_r=1&ref=ron_lieber