Home Buying in Houston>Question Details

Syed, Home Buyer in Houston, TX

I would like know step by step procedure of buying a foreclosed home what r the negatives and what are the positives of buying a foreclosed home

Asked by Syed, Houston, TX Fri Sep 6, 2013

what is the role of a real estate agent in the whole process and how does he get paid and by whom

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Foreclosure homes are offered through public auction and/or listing through real estate agents who have working relationships with asset managers. As a buyer, the best thing to do is to consult with a knowledgeable real estate professional. FHA will allow financing on foreclosures but have a lot of restrictions. Conventional loans are available and more popular (especially recent conventional programs that allow 3% down). The house has to have an appraisal classification of at least a C4 or else it cannot be financed and would have to be sold only to cash buyers. Cash is the best resort in areas seeing few days on market because flippers and investors tend to buy them quickly. Many foreclosures do have restrictions on investors (number of days before they can bid) or prefer owner-occupants.

Negatives of buying foreclosures:

1. Sold As-Is
2. Buyers fail to do their due diligence
3. Property condition or unforeseen repairs
4. No Seller Disclosure Statement, undisclosed items (foreclosures are protected classes and thus don't have to disclose like a regular seller/individual).
5. Deferred maintenance
6. Delayed lending due to property condition
7. Few repairs (if any) by the banks selling asset
8. Delay in communicating with some listing agents

Positives of buying foreclosure:

1. Possible negotiation (unless it is an area with a lot of demand or multiple offers).
2. Fast closings if cash sale
3. Price vs retail value (there tends to be a discount with most foreclosures unless of course they are in high demand areas then banks are wanting to compete with retail sales)

I hope this helps. Let us know if our real estate team can assist you. :)
2 votes Thank Flag Link Fri Sep 6, 2013
This is very helpful, though I'm not in your Texas market.
Flag Wed Sep 18, 2013
Each foreclosure will have their own process and guidelines depending on the bank that is selling it.

A HUD home is done with online bids, Fannie Mae Homepath are, too.
Your Buyer's Agent's Broker must be registered with HUD to bid on these properties.

All have a listing agent once it is posted on the MLS. The Seller/Bank pays the commission.
The Buyer pays his closing costs. If you are bidding against multiple buyers, you need to have an agent that knows what they are doing in order to put you in the best position to win your bid.

Most Foreclosure purchases are CASH at this point since the banks do not want to deal with a lender that is going to get picky on the condition of the home. If you have a Conventional Loan with a local lender, that is best. You will need Proof of Funds for your purchase, too

Having done numerous foreclosures of all types in the past, I can tell you that the best deals in Houston are pretty much gone. I noticed that some of the banks were holding back on putting them on the market in the anticipated uptick of home sales this past spring. They are getting as much for the homes as regular sales in decent parts of town.

Do check out your Buyers Agents websites and pick the Realtor best suited to you.
1 vote Thank Flag Link Fri Sep 6, 2013
I have read your question and reviewed the answers given. While most of these answers are helpful there is so much more for you to know. Having over 20 years of Professional Real Estate Service 8 here in Houston, I wanted to share a few comments in addition to what I read.
Choose a Realtor who you can communicate with openly, and honestly. That way they will be able to advise you on the best type of Foreclosure home to purchase.
This will help you to reach your purchase goals with the least frustration.
If you have not yet found a great Realtor to help you through this process please do not hesitate to contact me. If we are not perfect for each-other there are many staff members in my office I can introduce you to. We want you to feel protected, confident and assured in your decision process. Thank you, CatherineH@waynemurray.net
Flag Sat Sep 7, 2013
If you are asking about a specific property that is one thing, if you are limiting your search to just problem properties out of greed that is entirely different. I compare them, the first as stumbling on an opportunity the other to seeking out a problem. If you go out looking for a problem and get hurt that is an injury you caused, no one else. What are the negatives? They don’t happen overnight so there can be years and years of issues with the property, hence the lender usually wants to sell them “as is”. That translates to: you buy the house and the problems. Good luck,

Jim Simms
NMLS # 6395
Financing Kentucky One Home at a Time
I answer questions about financing real estate based on my decades of experience dealing with mortgage underwriters. I do not offer legal or tax advice, if you need answers from an attorney or CPA find one knowledgeable in your local market.
Web Reference: http://jamessimms.com/
0 votes Thank Flag Link Mon Sep 16, 2013
Go sit down with your Realtor and go over this.
0 votes Thank Flag Link Mon Sep 16, 2013
First thing you should do is hire a buyer agent who is WELL experienced in selling bank owned homes. They can bet great bargains when bought correctly. The keys are knowing the sale is most often as is, so inspecting the home before making an offer and having the agent guide you through the buying process from buying to closing
0 votes Thank Flag Link Mon Sep 16, 2013
If you're an inexperienced home buyer, the last place you want to purchase a home is at an auction ... you can't even walk through or inspect the property until after you own it. Whatever you save (if anything) will likely be eaten up by the cost of repairs and deferred maintenance (items that should have been routinely taken care of, but have not been).

As for simply purchasing one from an MLS listing ...

Infomercials aside, it’s a myth that anyone can just pick up a foreclosure for pennies on the dollar. While they may be aggressively priced at first, the strategy is to raise the stakes through a “bidding war.” Most end up selling for more than the asking price and close to actual value. Nobody’s giving away houses these days.

Just about all of these places need work beyond cosmetic updates. Simply put, they’re best suited for investors with deep pockets. I work with several, and see what it takes to bring such homes to livable condition … it ain’t cheap.

The terms should suffice to drive all but seasoned buyers away … “as-is, where-is, with all faults.” Bottom line: it’s yours as it sits … although most contracts include an opportunity to inspect the property and void the transaction. These homes are usually in rough shape, so it’s imperative to have them checked thoroughly … roof to slab. The cost is on the buyer and not reimbursable, even if the sale doesn’t close. The lien holder/seller will make no allowance for repairs … “as-is, where-is” sums it up.

Ironically, you can likely purchase a great home in better condition for about the same money … possibly less, given what it would cost to get most foreclosures into shape. It will be my pleasure to work with you toward finding that special place which best suits your family’s needs. There is no cost to you as a buyer. If I may be of assistance, please feel free to contact me.

Regards …

Al Geffon
Trend Setter Realty
(713) 213-6350
Web Reference: http://www.har.com/algeffon
0 votes Thank Flag Link Mon Sep 16, 2013
I totally agree with Saul. Repetition ensures proficiency. We have professional teams managing pre-foreclosures, REO properties, and investment properties, traditional listings, and more. I currently am a REO listing agent and will be able to assist with any REO questions you may have. Please feel free to let me know if you would like to be added to our REO distribution list once our pre-foreclosure properties became available.

Thank you,
0 votes Thank Flag Link Mon Sep 9, 2013
All interesting answers and helpful to your question. I used to be in the army and ran 5 to 15 miles daily except for most weekends. Now I would be hard pressed to do two! What does that have to do with it. Well if you don't keep doing it you lose some skill and it is hard to just jump right in. You want an agent that is currently doing foreclosures to advise you and how to go forward. Ideally, they should also HAVE a foreclosure listed themselves. Look up to see which companies are working those assets and chances are one of their agents can walk you through it.

Saul Carrillo
832-527-2268 saul.carrillo@carringtonres.com
3333 Alabama, Suite 125
Houston, Tx 77098
License No. 0573768 Atlantic & Pacific Real Estate (US), LLC
0 votes Thank Flag Link Sun Sep 8, 2013
Hello Syed, Great questions!

I am a REO Certified agent. I had provided “cradle to grave” services to multiple foreclosure properties for Bank of America, CMS (Carrington Mortgage Services), and AMHSI (Now Ocwen).

"Craddel to Grave" include, but not limited to, CFK, communicate directly with Asset Managers, provide monthly BPO, prevent code violation, weekly inspection, MSR, and much more.

I had assisted Sellers (Banks), investors, buyers with REO properties. I have the experiences and knowledge to guide anyone through purchasing a REO property and will be able to answer any questions that you may have regarding your Real Estate needs. You are more than welcome to send an email at KashiRealtor@Gmail.com to schedule a phone conference or more questions at your convenience time.

Thank you,
0 votes Thank Flag Link Fri Sep 6, 2013
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