Why are foreclosures homes so cheap?

Question

What's the catch is it really that cheap? How can I go about buying one? Do regular realty companies help? I see some houses listed at like 20,000 for a 3 bed 2 bath home... Is it for real? Any websites or realtors you know of I can talk more to about this because I will save up 20,000 and then buy a house flat out if that's the real truth.... Please All Info you can provide real facts and sources to back it up. Thanks

I asked for sources and real answers people not just an opinion.... Please give sources and reference things... I want facts not fiction

Answer 1

Of course it’s “possible,” but without knowing where you saw this property advertised, it’s impossible to know how reliable your information is. I have seen instances where homes are listed on real estate websites at the starting price of the sheriff’s auction, meaning bidding starts at the $20K price you see and ends with whatever the highest bidding investor is willing to pay. If you buy at auction, you’re usually buying sight unseen and must have cash to pay if you win.

Look at this from a common sense perspective: if homes in your area usually sell for (pure conjecture) $150,000, and you see one for $20,000, you have to assume there are major issues. Even if the bank was only owed $20,000, they would absolutely try to turn a profit on the if the house was in a condition to bring $100K or more.

There isn’t just one good real estate website I can point you to. I did buy a foreclosure, although it wasn’t drastically less than other homes around it (and there weren’t any major condition issues). I Googled the topic and read everything I could.

I would absolutely hire a buyer’s agent. If you plan to buy from a bank, banks usually list their homes with agents. Your buyer’s agent will be your best ally in helping you find a deal, making sure you can handle the costs of repairs, and then negotiating with the selling bank’s agent.

Answer 2

Here is the real reason. There are so many foreclosures, and not in "bad" areas or with "rundown" homes, that the banks have to sell them at ANY price to get them off their books and bring in some cash. Everyone of those foreclosures still has bills. Taxes are still due and the banks are paying. The end of the year is coming up and if the homes are not sold than the banks have to pay taxes and insurance again. That is throwing good money after bad. Additionally, Cleveland, like Michigan, has been in a recession for a long time, the rest of the country is finally ending up the same way. What did we think would happen when we keep demanding cheap things to buy? Companies downsize and off-shore, jobs are lost, more secondary jobs are lost, then PRESTO, recession. Really though if it is being sold at 10% of value there is something really wrong. Foundation, walls, termites, mold, taxes, other liens, something. That is way too good to be true, but if you have the knowledge and do your due diligence (I would definitely take a contractor with you) you may get the deal of a lifetime.

Answer 3

The answer to your question varies. Some of the internet ads you see for 'foreclosed homes' don't give the asking price of the property. They are merely indicating what the amount of the loan deficiency is currently. Other properties which are being sold dirt cheap may need a substantial influx of cash to bring them back to decent condition. Those who are foreclosed upon are known to remove plumbing fixtures, cabinets, doors, and anything else not firmly nailed down.

Another poster indicated that banks cannot ask for more than is due on the loan, which is quite false. Banks ask for as much as they can get out of these properties. Most are listed at market values, and then the negotiations start.

Answer 4

It is for real! The foreclosure rate is astronomical! In a foreclosure they can only ask what is owed and sometimes they come down on that as the lenders are trying not to go under themselves. So many lenders have lost so much money that they have had to file bankruptcy for their business.
How you get a foreclosed home is to get a mortgage loan and then call on the foreclosure.
If any repairs are needed you can add it to your loan to fix the needed items.

I am a mortgage broker and this is fact not fiction!
First you need to qualify with a mortgage then you need the property that you want to purchase.

We don't know where you live and Realtors will not want to waste their time unless they get your business it is a commission driven business. You can go to the web your self.

Answer 5

Banks are NOT in the business of buying houses.

By the time a house is foreclosed upon, the bank has already received a lot of the money owed by the mortgagee. They only require the amount still owing, to get the house off their hands.
Talk to a loans officer, at your bank, to see how to go about a home purchase. Good luck.

Answer 6

You need to be careful here. You will see a lot of foreclosures listed BUT, ALWAYS go and see them before you even think of submitting an offer. In this country, a lot of these homes go to auction and thousands of people have lost a lot of money by buying a property they never viewed beforehand, then find out it is going to cost THOUSANDS to repair/refit/remodel. The only thing mortgage companies care about with foreclosures is getting the money still outstanding on the mortgage, that's why they are listed so cheaply, but you really need to be VERY careful.

Answer 7

Because you aren't ralking about foreclosure homes; youare talking about advertising tools used to get you to buy a "foreclosure secret list" and you can kiss that cash goodby. Foreclsoure homes in most states are sold at auction; and usually sell for pretty close to what the market is for a home in that area at that time. There are some houses out there for 20k; in areas you can't live in and in condition no DIY can help.

Answer 8

Banks want to sell those houses as soon as possible. They want to at least try and get what was owed on the house and the interest. But will settle for less to get it off their hands. And most of the houses are in bad shape and are sold as is.

Answer 9

Remember the saying: You get what you pay for. If you see something listed for $20,000, you can bet your life savings that it'll take 5 times that much to make it liveable.

It's probably a disaster area inside -- ruined carpets, missing appliances, plumbing fixtures gone, holes in the walls -- you name it, people can do it to a house they're about to lose.

Answer 10

Easy one. With the housing market collapsing due to reckless lending, there are no buyers and there is no chance of the mortgage companies getting their money back. They are cutting their losses and trying to get at least a bit of their money back.