Buying foreclosed homes for $10K-$25K? Huh? and What?

Asked by Justin Baughman, 97470 Sun Apr 5, 2009

In short, I'm deploying next week and will be gone for the next year. I'm currently in the Army National Guard. A battle buddy of mine suggested that I look into buying foreclosed homes, stating that I could possibly buy a home for as little as $10K. For one, I need to know if this is true. For two, I've been doing A TON of research with no clear answers and only more confusion. If a bank forecloses on a home, they can only ask for what is owed, so if an owner defaults on a $150K loan by only say $15K then the bank can only ask for that amount. With that, would someone like me be ACTUALLY getting the house for $15K (using as an example). OR, is it to pay off the loan and the new owner would be liable for all tax liens placed on the property and second and third mortgages? I basically am looking for my first ever home for myself and my wife and need some SEVERE guidance.

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Dirk Knudsen’s answer
Dirk Knudsen, Agent, Hillsboro, OR
Sun Apr 5, 2009
Yes Justin... Your pal is incorrect. Foreclosures while a good value generally sell at close to full market value. There are steep discounts on some property at the court house steps but that requires all cash and a real knowledge of the market as you may be buying it sight unseen and without knowing what is inside of there.

Banks have a duty to get the loan value back. That is not always happening right now and so we are selling a lot of homes short. The basis on this stuff is where would you want to invest? What great values are out there? What can you do to manage the homes once you find them?

I would say that there are a few homes for $10K I have seen but they are in Detroit and markets like that and are complete rehabs. Your friend is advising you incorrectly. Having said all that there are great values out there in this market and you can find them and make money in this market. This is something however you should be actively involved with and not just leave up to chance or in the hands of others while you are away.

Hey Justin thanks for serving our Country. We support you all the way so stay safe and God Bless!

Sincerely;

Dirk Knudsen
Re/max Hall of Fame
Web Reference:  http://www.theknudsens.com
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Corri Klebaum, Mortgage Broker Or Lender, Clackamas, OR
Sun Apr 5, 2009
If I understand your question correctly the 15k you say is owed would actually only be the arrears, the lien of 150k would have to be satisfied in addition to any other liens on the property, taxes, 2nd mortgage, contractor liens (in new construction or remodels). In rare cases you might find a borrower who only owes the 15k and just wasn't saavy or realistic enough to sell on thier own and walk away with profits before they default, very rare!

From my experience in working for creditors we would try to get the full value of a home as there are usually attorney fees, utilites, etc. to be paid. If for some reason they actually have sold the property for more than the balance and collectable fees the borrower is entiltled to a refund. In reverse the borower is responsible for the deficiency unless of course a bankruptcy has wiped it out.

These properties are in most cases are distressed as when you don't have money to make payments you don't have money for upkeep, and once the reality sets in when they are losing the home to foreclosure many will gut the home in an effort to raise money. One guy even left pigs in his house to make a statement... sad but true.

The truth is these homes will require a lot of TLC upon aquisition and this would be quite an undertaking for you and your wife with your deployment upon you. I am not saying to give up on your quest they are out there but the reality is these "steals" are few and far between. IMHO the experts that are sharing thier "secrets" to buy undervalued real estate are just trying to sell books and DVD's.

As a wife of a veteran and a big sister to my brother who is also getting ready to serve his 2nd deployment with the Guard I know the sacrifice you and your family make so that you may serve our country, you are in my prayers Justin. God bless you and your family.

p.s. I linked the story to the pigs some time ago in my blog, here it is in case you were curious...
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