Isnt buying a foreclosure home the best way to go?

Asked by Mom's House, Madison, WI Tue Jul 5, 2011

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16
Gerard Carney, Agent, Spring Hill, FL
Wed Jul 6, 2011
No it is not, it is a stupid label that funnels suckers to snake oil, Ask your Realtor to show you the absolute best deals on the market that day and you will see loads of better deals!
3 votes
Guy Lofts, Agent, Madison, WI
Sat Jul 9, 2011
I think Gerald's answer is by far the best one.
The act of buying a foreclosure from sheriffs auction is very risky. you get virtually no warranties,
REOs give you a better warranty, but offer drawbacks.
Pick a good buyers agent and have them explain the pros and cons of each type of sale and as Gerald says, just look for the best home on the MLS and make a deal. (Bear in mind that all buyers in that price range will likely be after the same properties.)
Web Reference:  http://www.RealEstateGuy.Net
1 vote
Bill E, Home Owner, Madison, WI
Wed Jul 6, 2011
Naturally there will be some foreclosures that are in good condition and owned by cooperative banks. Those will closely resemble ‘typical’ houses for sale and that will be reflected in the sale price.

There is no free lunch in real estate.

Your experienced Realtor will guide you through the process, pointing out potential pitfalls as they present themselves. Know ahead of time that the banks generally don’t like to use the Wisconsin DRL-approved forms and will prefer to “negotiate” verbally. This keeps them from being committed to any one buyer, dollar amount or timeline, keeping their options open to anyone willing to pay more, inspect less and close sooner. Read carefully the informational sheet that will likely accompany the MLS listing. Pay special attention to such phrases as “As- Is Where-Is” and “Highest and Best”. In a nutshell, they bank won’t disclose or repair anything. They will act like there are multiple offers when there are not, they will ask you again and again for your “highest & best” offer and play one party against another. They use the same set of ethics that created the foreclosure problem. (Hint: NONE)
They may accept your offer, cash your earnest money check then turn around and reject it a week later. They may reject your offer and sell it someone else for less money. Months later. They may completely ignore your Offer, not answer the phone, email or US Mail regarding that status of any “deal” that you thought you had. You may be all ready to move and the Bank might ‘discover’ a problem with the title and refuse to close. They may charge you $100 a day for every day you are late for closing even though they dragged their feet every step of the way through the deal.

Keep in mind: the house didn’t end up in foreclosure because it was in good condition, in a good neighborhood, well-maintained, painted, gutters clean, furnace serviced, windows washed, lawn mowed on a quiet street with nice neighbors and good schools. If those things were true, you aren’t the only one who noticed and the sale price will be higher than the asking price and you still get all the negatives of buying from a bank with thousands of other foreclosed properties on their books.

But yeah, foreclosure is the way to go. For sure.
1 vote
Bill E, Home Owner, Madison, WI
Wed Jul 6, 2011
You will EARN every penny you "save" by buying a foreclosure. The rules are different. The motivation of the seller is different. The timeline is different. The amount of work you will put into the deal, the house, the financing...the whole thing will be far more difficult than anything you ever imagined.

But you will not accept this. You will have to bang your head against the wall, over and over and over again before this becomes clear. Then you will do it all over again.

You will have to view houses with no appliances, carpet, paint, furnace, holes in the drywall, leaks in the roof, weeds in the gutters, water shut off, etc etc . You will have to see the worst that homeownership has to offer....graffiti, mold, feces, vandalism, roaches, mice, leaks, neglect, 'deferred maintenance". You will experience first hand the indifference of the banks who own these properties. You will get to see why nobody bought the house before it went in to foreclosure. You will see what how people treat a property when they know the bank is going to take it, the Sheriff is going to evict them and they feel like they have been screwed over by the system, ripped off by their lender and left twisting in the wind by a fickle real estate market.

You will see why many Realtosr will simply pass up the "opportunity" to sell you a foreclosure.

Ask yourself if you want to buy a house or if you want to buy a foreclosure. If the anwser is "foreclosure" you probably spend a lot of time at garage sales, on Craigslist and digging through piles of trash at the curb looking for bargains. You want something only if it is cheap.

The level of motivation, sophistication, patience and financial wherewithal required for a successful foreclosure transaction far exceed those usually found trolling Trulia for ad v ice. Good Luck. You will absolutely, definitely, most assuredly need tons of it.

The market determines price. You will get exactly what you pay for. Like that Monet you got at the rummage sale for cheap.
1 vote
Mack McCoy, Agent, Seattle, WA
Tue Jul 5, 2011
Sure. Why not? Have at it!
1 vote
Chris Venden, Agent, Madison, WI
Sat Jan 14, 2012
I recently blogged on this very topic. Here is a short article that answers your question.
http://www.trulia.com/blog/chrisvenden/2011/12/which_homes_o…

Have a great day!

Chris
Web Reference:  http://howwehelpyoubuy.com/
0 votes
alexmominee, Home Buyer, Verona, WI
Fri Jan 6, 2012
IF YOU ARE HANDY and PATIENT - Forecloser is the way to go for sure. FOR SURE.
If you are not handy or patient, then buying a forclosure is a good way to learn how to be!

Seriously all of the so called "horrors" that agents talk about really aren't that bad, you just have be to patient, be willing to do and learn how to work on homes.

It can all sound intimidating- some of the below posts go on and on about the problems with foreclosed homes, but if you zero on any specific one you realize it's not rocket science to fix it. If you have a high school diploma and internet access you can learn.

You get better deals with REO because the number of people interested in foreclosed homes are waaaaay less than non-REO. Probably because of discussion threads like this where agents scare people away.

If you are completely unwilling to do or learn anything or need a move-in ready house by the end of the month, OK don't buy REO.... but you can bet that those who do will retire before you.
0 votes
Seth Peterson, Agent, Madison, WI
Wed Jul 6, 2011
I have sold a number of REO's to buyers in the Madison area over the past couple years. REO stands for Real Estate Owned, and it's basically a house that has gone through the foreclosure process and is now owned by the bank - many people refer to REO's as "foreclosures." Anyway, many REO's are listed with a Broker, so in those cases they are on the MLS like any other house listed with a Broker. In my experience, these REO transactions have been quick and easy. Also there is less risk in buying an REO as compared to buying a foreclosure at a Sheriff's Sale...that is mainly because of two things: (1) You should get clear title when you buy an REO, and (2) If it is an REO you can view the house prior to purchasing it, and you can even have an inspection contingency in your offer if you want.

In other words, do not be scared of REO's. They typically are not time consuming like many Short Sales, and you have the ability to view the home and do inspections so you can get a good idea of what the house is prior to purchasing it.
0 votes
Scott Hulen, , 64068
Wed Jul 6, 2011
The reason why most foreclosures are generally sold to investors is because buyers don't understand the ramifications of purchasing a foreclosure. Bill offers good advice what could happen if you buy foreclosure. There are many reasons why homeowners don't by foreclosures: reasons include poor condition of the property, the deal just isn't there, it wasn't what we were expecting, what about the unknowns, are just a few to start with. When a buyer asked me should we be looking at foreclosures I tell them if we look at short sales be ready to wait months and not be able to close the home there's no timeline in short sell so if you have plenty of patience for a short sell to work for you. When we look at foreclosures these do close in an acceptable time frame, but you are buying the property as is. When buying a foreclosure there may be hidden defects and latent defects, even though you save money on purchasing the home if you not have deep pockets may not be able to flush the toilet. If you want to look at foreclosures and have extra money, are willing to do a 203K loan and have the mindset of an investor, willing to compromise on a great many things that he can get a great value in foreclosure market. For most people that is not the way they purchase a home, they think about how the home fits their needs, the children playing in the backyard, having glass a wine on the deck and sitting in front of the fireplace. So before you go to look at foreclosures and short sales do with open eyes. Good luck, Scott
0 votes
George Silve…, Agent, Madison, WI
Wed Jul 6, 2011
I would recommend that you look at foreclosures along with a variety of houses in your price range. That is one of the best ways to judge the value of an individual property, in addition to seeing whether the home actually meets your needs. If the foreclosure or any home needs a lot of work, you will need to price that in when considering the real value. If you are capable of doing a lot of the work yourself, that can be less from a dollar standpoint. I have found that a number of buyers simply find that the work involved in restoring many of the foreclosures is more than they care to do and look for a well priced conventional sale.
0 votes
Eric D Lenz, Agent, Greendale, WI
Wed Jul 6, 2011
Short sales and foreclosures often seem to offer the best pricing, but financing may be difficult and since it's the place that will put your life and lifestyle, limiting your options to foreclosure might not be in your best interest. If the purchase is an investment or flip, that's another story. But, for the house you want to call home, open yourself to more. Many sellers offer some pretty compelling alternatives.
0 votes
Seth Peterson, Agent, Madison, WI
Tue Jul 5, 2011
If you are looking to get a really good deal, then your best bet is a foreclosure or REO. Of course that doesn't mean you can't get a great deal otherwise. And if your main priority is to get a house you love, then you don't want to just limit yourself to foreclosure/REO properties.
0 votes
Dan Tabit, Agent, Issaquah, WA
Tue Jul 5, 2011
Mom's House,
Foreclosures can be a good option, but realize that the previous owners have been in financial hardship. Chances are good they didn't maintain the home and in some cases may have taken out their frustration on the home. Banks have limited ability to disclose any known defects since they never lived in the home.
If you pursue a foreclosure you need to keep your eyes open, set aside some money for updates and repairs, have it thoroughly inspected and be prepared to wait if the bank doesn't respond quickly.
0 votes
Shanna Rogers, Agent, Murrieta, CA
Tue Jul 5, 2011
Hi Mom's House,

Not necessarily. The home you purchase depends on what you are 'looking' for. While price may be good on a foreclosure, you have to remember that REOs are sold 'As Is' and the banks will rarely (if ever) do any repairs. Also, the banks do not know if there are 'problems' with the property as they have never lived there and are therefore exempt from some disclosures - and therefore you have no recourse. If you do decide to purchase an REO, make sure you have inspection contingencies in your purchase contract and do inspections. This way, if something is discovered that you do not want to pay for to have repaired (or cannot afford to, depending on the cost), you can cancel contract without being in breach and without forfeiting your ernest money deposit.

Shanna Rogers
SR Realty
http://www.RealtyBySR.com
0 votes
Patrick Terry, Agent, Sun Prairie, WI
Tue Jul 5, 2011
When making the biggest investment of your life, you can't soley look at one aspect of the purchase; ie is it a foreclosure. I think the most important aspect of the purchase is; will this home service the needs of my family and also fit your lifestyle and your budget. And in the end it always comes back to the bottom line.

When I meet any buyer, I like to start by asking them what they would like their monthly payment to be. By doing the math in reverse we can figure out what their budget is. Then we can determine what kind of homes will fit into that budget.
0 votes
Vera Gonzalez, Agent, Sterling Heights, MI
Tue Jul 5, 2011
Mom's House,

If you love the house it does not matter. The deals are great from all sides private, etc. It is up to the consumer.

Good luck

Vera
0 votes
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