2. Condition: The property is likely to be in horrible condition, possible teardown, there might be haz mat issues.
3. It may not be economically viable to even build or rebuild on the lot.
4 Title issues: An expenditure of $12,000 might not get clear title for you, if that is the balance of only one loan amongst other liens that are owed on the property.
5. Sale and Transfer issues: A seller can offer a property at a quoted price below the minimum acceptable price. This is a form of bait and switch, but it is not illegal.
For example. Seller says "List price is $12,000 - SUBJECT TO BANK approval " Well that means that the bank can come back and counter offer a list price offer and ask for a million dollars. There is nothing to stop the bank from doing that. -
Think about it this way -
Most single family homes in the east bay range from $100,000 to Several Million dollars. Taking nearly the worst cast scenario any home would be easily sold for at least $100,000.
Imagine this -
Someone comes to you with a suitcase full of cash that amounts to $100,000 and all they ask is that you give them a check for $12,000. Under those circumstances would you be suspicious? Would something inside you say maybe there is a scam going on here?
If you are looking for "preforeclosures" or short sales, homes with notices of default (NODs) filed on the property, there is probably nothing available in the $12,000 range at this time. The reason, of course, is because the lender, who must approve the sales price in a short sale, is unlikely to approve a price for less than the mortgage amount. Once a home is taken in foreclosure (and the lender can seek some offset in the cost from a secondary mortgage insurance carrier), then the price of the home can be adjusted to market value.
Ater foreclosure, you may find properties priced as low as $12,000-$20,000, but as the other two agents have already noted, the lender (bank) will likely be pricing the property at this price because it will need considerable rehabiltation to make the home livable, and--depending on the situation--there may even be government forces in place that will require that this work be done soon (for example, in as little as a few months after the close of escrow), so only those with contracting abilities and available ready cash would be wise to purchase these properties.
For your $12,000, i might suggest concentrating on REO or foreclosure properties where the possibility of finding a home in this price range is better.
Good luck and happy house hunting!
Grace Morioka, SRES, e-Pro
Area Pro Realty
Jim is right. The devil is in the details. Over here, we say "just because it's a foreclosure, short-sale, REO, etc, does not necessarily mean it's a good deal. One thing I learned about economics is the law of supple and demand. I have heard complaints form over 90% of the people who have bought "distressed" properties that though they were getting a "good deal" and it turns out there are title issues, rehab costs too much, leins, and so on. A friend bought a "600k" house for $230k. After months of rehab costs, carrying costs (hidden cost, of course), legal and so forth, he's in for about $550k. So he "made" about $50k. Not a bad return, per se, but also a lot of work, time, headache, opportunity cost (he owns another retail business which has suffered because his time was elsewhere). Point being: after his rehab work and time, coupled with his loss in his other business (increased labor costs, for one), he didn't come out "ahead". What he thought was a "great deal" he could have bought another property without the added expenses.
There are other ways around this, and buying "preforeclosure" isn't the best way because of the "catchphrase of the week".