foreclosed homes?

Question

Can somebody explain foreclosed homes to me? Why are they cheaper than normal homes? And why doesn't everybody buy them if they are?

Answer 1

Foreclosed homes fall into several categories so to group them all together is confusing. The foreclosure process varies from state to state but it usually involves a notice of default, filing of the foreclosure and the sheriff sale. The foreclosed homeowner may or may not have the right to "redeem" (pay off the debt and repurchase the property) up to and even after the sheriff sale.

If you purchase at a sheriff sale, you will usually not have the right to inspect the property. That could mean many defects. As stated above, people who cannot pay the mortgage often damage the homes and rarely can afford proper maintenance. Some people feel they are entitled to remove fixtures which they have put into the home upon foreclosure so you will see homes with cabinets, tubs, toilets etc. removed. Although the foreclosure process should clear any liens on the property (except for taxes and municipal liens), there are often mistakes made in the process and you will later have to pay to have liens cleared. You are not receiving a warranty of title in a sheriff's deed. You will also generally need a significant portion of the sale price (20-50%) in cash on the day of sale (again, this varies from state to state).

At the sheriff sale the bank will bid its interest in the property. This is the amount of the loan plus all outstanding expenses. This is often more than the property is worth. If the bank takes the property then it is disposed of in one of several ways. First, if the loan is government insured, then the property is returned to the government agency insuring it. HUD is the largest such agency but there are others such as VA, USDA, Fannie Mae and Freddie Mac (the latter two are quasi governmental but that is beyond the scope of this answer) that insure large numbers of single family home loans also. There is also private mortgage insurance which will pay the bank for a percentage of their loss.

If the government or the bank market the property subsequent to sale, the process is about the same. The property will be listed for sale as-is in the local multiple listing service through a realtor. At that point you would have the opportunity to inspect the property inside and out and also to make your offer subject to certain inspections. You can also get a loan on many foreclosures, provided they are not in such bad shape that no lender would consider them sufficient collateral. If that is the case, there are rehabilitation loans available but that is a much more difficult process.

If you are truly interested in this, I would suggest you take a look at the sheriff sale process in your area. Also, check your local paper for sheriff sales and note the amounts for which the properties are sold at sale. In some areas you can see all sheriff sales online at http://www.publicnoticeads.com If your area is not included in that, then check your local newspaper online and do a search for sheriff sale. Next check the hud website for your state. You can learn more about buying a hud home and what the prices are at: http://www.hud.gov/offices/hsg/sfh/reo/reobuyfaq.cfm

If you would like to check a few of the bank websites to see how and for how much they market their properties, check out IndyMac Bank and Bank of America online. They both list their properties online. I think you will find that the properties are priced comptetively given the conditions.

Finally, you should understand that appliances, paint and landscaping alone (all of which 95% of foreclosures need) can cost thousands. This alone mandates a discount from the pricing of other homes.

Good luck, I hope this helps.

Answer 2

We bought a foreclosed home and financed it. No problem. Things to consider. If the home is not inhabitable, you can't get FHA/VA financing. Conventional financing may also be in question. Get a house inspection. A foreclosure usually means that the previous owner couldn't afford the mortgage - leading to the possibility that the previous owner couldn't afford to maintain the property. Our home was 98% move-in ready, just had to fix two minor electrical problems and replace all of the ceiling fixtures. There isn't too much money to be made (interest for the bank) on a $30k mortgage. Don't know if they would be looking to finance your home. Talk with a lender, they will give you the only answer that's usable. You should talk to a lender and apply for a mortgage before looking for a home. Get approved for your mortgage. Like any loan, you'll have to have your credit checked. Then do nothing to increase your debt load until after closing. That way, you won't be looking at homes for which you couldn't get a mortgage. Almost everyone does qualify for a $30k mortgage. When you do find the home you want, then complete the transaction. There's a lot more to consider. How will you have the property deed drawn up? Joint Tenants with Right of Survivorship? This is where the death of one owner will result in the survivor taking possession of the property without a will or probate. Joint Tenants in Common is where each person owns a share of the property. That person can sell their share without telling any of the other owners or requiring their permission, or they can pass their share on to their heirs or anyone else through a will (requiring probate). Then there are unknowns. What is the probability of you and your fiance staying together? Excellent I presume. But if things turn sour, how the deed was recorded can make the property transfer an issue. I've seen many questions on Y!A where loving couples (or even friends) break up then they have questions about property they've purchased together. Now it take a lawyer and a judge to straighten things out. And almost always, one of the people will thing the division is unfair.

Answer 3

A foreclosed home is when someone has defaulted on their home loan and the bank takes back possession of the house. One of the main reasons the home is cheaper is because the bank is only looking for the remaining amount of the loan to be paid. I'm not sure how it works in other states, but I know in Alabama, after the house has been sold to someone else after the foreclosure, the original owners have up to a year to come up with all the money for the house plus any repairs that have been done since then. 99% of all banks won't take the risk of giving them another loan. A lot of people think its risky business and there is some legal tape that has to be cut through but it can definitely be worth the hassle.

Hope I made it clear and didn't confuse you more. lol

Answer 4

the big issue with foreclosed homes is that you usually have no idea of what condidtion they are in.

because of this, professional speculators in them won't bid more than about 40 or 50 cents to the estimated value the home would fetch in today's market if it was in good selling condition.

it is not unusual for a foreclosure to be trashed by the time the bank gets the current 'owners' evicted.

I've seen or heard of cases where someone took a Sawz-All to the cabinets and interior walls through out the house because they were irate about losing the house. Not to mention destroying the carpets, paint, plumbing, lighting, and just about everything else in the house.


buyer beware.

Answer 5

A foreclosed home is a home that the bank repossessed because the former tenant did not pay on the loan as agreed. They are cheaper because the bank is more interested in getting rid of it rather than making a profit (in most cases, there is no profit). The average foreclosure costs a bank $40,000.

Answer 6

First its a complictated process. Basically Family A can no longer pay for their home, if they cannot pay after a certain time the bank or mortgage company will take possession of the house and will sell it for the amount of the loan that is still outstanding. So sometimes you can buy a house for less than market price sometimes not. This process can take up to 18 months to 2 years from start to finish.

Answer 7

People who can't keep up the payments on their homes usually let the repair of their homes fall apart.

It is harder to get loans on distressed property.

If a home is foreclosed & to be auctioned off you may not get to see the inside before the sale.

If you wanted to buy this house you would need to pay cash or have an open line of credit.

Foreclosed homes can have claims on them that need to be cleaned up.

There are bargains to be had, but you can get burned also.

Answer 8

Everybody doesn't buy them because their are several mitigating circumstances to acquiring one, financing being the number one reason. Most foreclosures will need to have repairs (which makes it's current value less than the fixed-up value) many many mortgage providers will not allow financing for properties in disrepair or if they do it will only be what the property is currently worth, so the buyer needs to have the financial resources to pay for the repairs. This fact alone keeps many out of this arena.

Answer 9

When you buy a foreclosure, you purchase it 'as is', and sometimes that means considerable repairs and maintenance must be performed by the new owner. If you happen to find a foreclosure with no repairs needed, you're going to pay the market price.

Answer 10

well you see my dear sir, i am a golf player and i can tell you foreclosed homes are homes that have been troubled by heavy golf ball bombardment, these homes are dirt cheap, mostly because no body wants them, i can personally vouch for this being a golf player and all, but if you would like to take this risk please contact my buddy eric