Buying Foreclosure Properties

[Matt]

Hi Folks,

I sent out a note on Twitter about this, and should be connecting with a couple of people in the next few days, but also wanted to ask here if there was any experience with this?

As some of you know I am in the middle of selling Brooklyn and we are staying (in a simply amazing) cottage upstate for the summer- when done, we need a place to stay. I was thinking about foreclosures in Westchester County or above, we like the idea of something a little more suburban now and also I think the foreclosure market may be a little softer up there (compared to NYC).

I've looked into this briefly in the past, and understand that there are various stages of the process, from lies penden upwards - but really want to get a grasp of inventory and pricing... there are a lot of subscription based websites but I don't know if I trust them, so if anyone has any insights on this it would be great to hear from you.

I'd be looking for: websites, general tips, pitfalls, timing/duration etc..

Cheers,

Matt

 

[yuneeq]

I would love to hear some info about the same. I coincidentally was doing a little google searching yesterday that taught me that the best place to find foreclosure properties is from real estate agents. Because the websites are inaccurate and tell you info that any real estate agent could tell you for free. I hope I don't sound like a total moron.

 

[fulthrust7]

We've been involved in a couple foreclosure transactions, but none of them ever panned out. There's a few things you need to keep in mind.

You should be able to go to www.mris.com and search by forecloures and shortsales. Same with other websites like redfin, etc.

It is a long and tedious process, more so with short sales, because the seller is still technically involved. A foreclosure is simpler because it is just the bank you're dealing with. You have to realize that the price listed may mean absolutely nothing, more so with short sales. The seller may have a lean for 300K but because in the process of defaulting, is looking to just get out. The price could be listed for 200K, and there may be more than 1 lenders. Ultimately the bank has to agree on the loss. So they may counter a 270K back to you 3-4 months later (short sale). In a foreclosure, there is usually multiple people interested if the price is really good, so it becomes a competing event, and you often pay more than what it is advertised at. Furthermore, everything is as is. You have the right to walk away after an inspection if there is significant work that needs to be done that was not apparent physically.

We lost on one because someone outbid us and the other one was a condo which the association were under a legal battle with the developed due to some structural issues that I discovered later after we were under contract and so we backed out.

 

[SCC]

I'll share a quick thought based on Texas real estate, not sure how different is up there. 1) title companies here won't issue title insurance on foreclosure properties. 2) Because of this you need to make sure you do, and can trust, your due diligence. Namely, doing a title search and ensuring that there aren't any other liens on the property that will survive after the foreclosure.

 

[InstinctX]

A college friend and her husband went through a real estate investment group to find their first rental property (they live in Utah, but bought and manage a rental property they bought that was foreclosed in Las Vegas (?). They now have another property.

The real estate investment group does the research & analysis to identify properties that are in foreclosure status across the different markets / regions. Please reach out to me if you want to learn more. They do charge an initial "membership" fee. Then for each property you buy, they charge flat % fees for title, securing a property management company.

 

[Lotta Travel]

Thanks for starting this topic. I'm interested in finding a foreclosure as well. Thinking about North of Miami or North of San Francisco if anything is even slightly possible there. Not necessarily for living right now but for rental to start.

Westchester sounds nice. I'm originally from New York and miss it but couldn't deal with Manhattan again. Vermont has its appeal as long as one has a Caribbean getaway or at least a spot in Florida for the 8 months of cold weather.

 

[KennyBSAT]

Like MS, it's all local. Or I should say statewide. For instance in Texas the foreclosure process is a minimum of 42 days. In Illinois, Maine, New Jersey, New York, Vermont and Wisconsin it's minimum 10 months. So I imagine there is a lot more opportunity for preforeclosure activity there than here, which could work for or against you depending on what you want to do. It is also a huge money suck on the bank and results in a much higher balance on the loan at the time of the foreclosure sale. My brother and I bought and resold 18 houses over a couple years and learned the Texas process very well, but I would expect to have to unlearn and relearn everything in another state. Throw in the fact that the same word or term can mean different things in different states and it gets really confusing.
We did 100% of the legwork and homework (and lots of the construction work) rather than potentially giving most or all of the profit to investment groups or deal-hunting services. In fact based on what many investors pay to play the game without doing any homework, I could do very well with a little real-estate-deal-securing business for suckers, but that's not me. The unfolding and discovering of tips and tricks worked basically identical to learning MS. Maybe I can have Shaun do some circles, arrows and illustrations

 

[freebee]

I would love to hear some info about the same. I coincidentally was doing a little google searching yesterday that taught me that the best place to find foreclosure properties is from real estate agents. Because the websites are inaccurate and tell you info that any real estate agent could tell you for free. I hope I don't sound like a total moron.

That is correct, you dont need to pay to get this info. I have purchased quite a few bank foreclosed properties during the slump from 2008 to 2012, either looking them up on Realtor.com or my agent's list, and my agent could get me more details, if I needed any. I had no issues, and didnt need any other help. I had one case where the title company missed a city lien on the propertty, which the city tried to recover from me later, but the title company paid up, after admitting their miss.

 

[KennyBSAT]

Another thing that becomes confusing: defining 'foreclosure'. If you do a short sale, a sale subject to the existing loan, or anything before the foreclosure sale that is what I call a pre-foreclosure. If you buy from the lender (or VA, FHA, HUD or any investor who bought the property at the foreclosure auction or sale) it is a foreclosed property, no longer involved in any kind of foreclosure proceeding. Actually buying a foreclosure property, to me, is buying at the courthouse or wherever sales are held in your county. In a true foreclosure purchase, you take title to the property and the bank never does. Those are just my definitions, but each one of those is its own game.

 

[cloudsurfer1]

Hi Matt,
New to the forums here....find them great ! Just a bit of my own experience in buying foreclosures....just got done with our 3rd, everything's finalized and the title is in hand.
The first 2 we did thru a realtor. It worked out great. This last one was thru hubzu.com

I would surmise that people who buy foreclosures and people who MS have very similar mindsets. They are willing to put in the sweat equity for an increase in value. It takes a lot of homework and legwork if you want to do well with it. The old adage about "doing it yourself if you want it done right" comes into play a bit here. But you know that. I wanted to share hubzu.com with ya'll since I didn't see it mentioned here.

Hubzu was great but...

1. you can't be in a hurry.
   
2. You have to be willing to deal with people that aren't very helpful (almost seemed like the enemy at times).
3. You cannot depend on them for basically anything (except maybe to cancel your contract)
   
4. You do things on their terms and timelines, no matter how ridiculous it may seem. (I had a bid denied because, according to them, I had failed to move forward with the process. This was while I had been waiting on them to send me my purchase agreement)
5. You never actually see a person. You are bidding to a computer
   
6. Property faults and damages do not create negotiation scenarios
7. the list could go on

Hubzu was great because...

1. They don't really care about the property, they have a quota to meet this month
2. There is some unbelievable value to be found if you're willing to deal with the hassle (and especially if you can do some renovation work yourself. I have a background in const so I do everything myself)
   
3. You deal with a computer on the bidding. Thus outbidding a competitor by $200 can be just as valid as $2000
4. Here again, I could mention more

As always, with foreclosures, actively check on the property, stick with it and just do it. Good things can happen ! It was a long process, a learning curve and a lot of "emotional roller-coastering", but I'm already looking forward to the next one !

Sorry about the long first post...assumed it would be easier to ask forgiveness than permission

 

[cathymayf]

Our son moved home in 2010 to save for a new home. He thought he would be able to find a deal in Vegas since we were ground zero for foreclosures. Our experiences were that for every home bid on, a flipper with cash swooped in and bought at the last minute. We put in bids on short sales and the banks took 6 months to come back with exorbitant prices and we still had to deal with getting the owners out. Finally after nearly a year of disappointment he bought new. Short sales and foreclosures here meant lots of damage to the homes as irate owners took out their wrath on the properties. Concrete in the toilets, no countertops, cabinets or a/c units left in many of them. It was eye-opening for us since we have been property owners all over the west coast for many years. Its settled down now and prices have risen but its not for the faint of heart.

 

[Matt]

Hi Matt,
New to the forums here....find them great ! Just a bit of my own experience in buying foreclosures....just got done with our 3rd, everything's finalized and the title is in hand.
The first 2 we did thru a realtor. It worked out great. This last one was thru hubzu.com

I would surmise that people who buy foreclosures and people who MS have very similar mindsets. They are willing to put in the sweat equity for an increase in value. It takes a lot of homework and legwork if you want to do well with it. The old adage about "doing it yourself if you want it done right" comes into play a bit here. But you know that. I wanted to share hubzu.com with ya'll since I didn't see it mentioned here.

Hubzu was great but...

1. you can't be in a hurry.
   
2. You have to be willing to deal with people that aren't very helpful (almost seemed like the enemy at times).
3. You cannot depend on them for basically anything (except maybe to cancel your contract)
   
4. You do things on their terms and timelines, no matter how ridiculous it may seem. (I had a bid denied because, according to them, I had failed to move forward with the process. This was while I had been waiting on them to send me my purchase agreement)
5. You never actually see a person. You are bidding to a computer
   
6. Property faults and damages do not create negotiation scenarios
7. the list could go on

Hubzu was great because...

1. They don't really care about the property, they have a quota to meet this month
2. There is some unbelievable value to be found if you're willing to deal with the hassle (and especially if you can do some renovation work yourself. I have a background in const so I do everything myself)
   
3. You deal with a computer on the bidding. Thus outbidding a competitor by $200 can be just as valid as $2000
4. Here again, I could mention more

As always, with foreclosures, actively check on the property, stick with it and just do it. Good things can happen ! It was a long process, a learning curve and a lot of "emotional roller-coastering", but I'm already looking forward to the next one !

Sorry about the long first post...assumed it would be easier to ask forgiveness than permission

Great first post - sorry I missed this, will check them out.

 

[beth p]

I have a friend that just bought his fourth. He gets amazing deals, but he spends time on it. It's his hobby. Two he was able to get into before the sale. The other 2 people were living in.
When I say "get into", I mean pushing up on the back glass sliding door to get in on one house. On the other house opening the front door (which was left open, along with all lights on and faucets running!). Breaking in isn't "legal".
Here in Ohio, the county Sherriff sales ( http://www.medinasheriff.com/Sheriff Sales.htm ) lists a pdf of the properties and the auction dates. Many times they are delayed or pulled. (ex of list: http://www.medinasheriff.com/NEW Sheriff Sale File/August 2014 - Sheriff Sale.pdf )

Sometimes he goes to the auctions and gets outbid from others & banks buying them back.
-The properties are listed at 2/3 of APPRAISED value, he only goes for ones that are appraised low
-You have to have the cash at the auction to put down on it (10%)
-He is able to pick up insurance after he gets it after he gets it
-The 2 that people are/were living in, he has to get the Sheriff to give them an eviction after he's owned it for so long. The eviction process takes 30 days.
-You are responsible for any past due property taxes, so it's important to check into stuff like this.
So while he is able to go and bid on it at an auction, it could take 90 days if the people are still living in it, to get it.

He normally hires out painting & new carpeting. He flipped 3 FSBO, and kept one for himself

In the end, he's made out tremendously with this, but like I said, it's his hobby.

He did have a friend that bought a very expensive house for a decent price at the auction. He too had broken in to see it. After he bought it at the auction, someone broke into the house and ripped out faucets, counters, anything they could get. They also took the in-ground pool cover & pool heater. That meant $ out of pocket he was going to have to put into it to flip it that he wasn't expecting. In the mean time he also had to pay the ridiculous taxes on it, so it wasn't as easy of a flip as he had anticipated and cost him much more.