North Carolina Foreclosure Homes: Affordable Housing or Money Pit Nightmare? Or something in between?

By
Real Estate Broker/Owner with Realty Arts NC Broker License #235526

The message is made clear in "Agent Only" Remarks in the listings.  No disclosure is the most common thread.

"Caveat Emptor!  We aren't going to tell you much, if anything about the property, but here it is if you want it."

It is NOT my intent to say that ethics are violated here by foreclosure Sellers or Listing Agents.  I really only want to hammer home a point to Buyers who put their credit and finances on the line chasing profits that can be quite elusive.  The risk in buying these homes is great, and risk-adverse Buyers, or folks with fragile financial standing don't belong in this market.  Can one make profit/equity in foreclosures?  Yes.  But it isn't a lock, isn't guaranteed, and isn't easy. 

I pulled up some "Agent Only" Remarks for Buyers to consider, with my commentary in bold font:

"No property disclosure. Property is a foreclosure. No knowledge of the systems."  "Am I safe to assume there will be no Seller repairs?"  I think so. 

"*Sold 'AS-IS'*. Seller to make no repairs. Propety exempt from Residential Property Disclosure. Seller to send addendum for completion after negotiations finalized. REO Department hours are Mon - Fri 9am to 5pm est. *NO UTILITIES CAN BE CONNECTED FOR INSPECTIONS ON THIS PROPERTY.* CASH OFFERS REQUIRE A 10% EARNEST MONEY DEPOSIT IN CERTIFIED FUNDS TO CLOSING ATTORNEY." 10% Earnest Money on a cash offer?  The banks are tired of people waking away from their $500.00 deposits, and want Buyers to have a little skin in the game.  With no disclosure.

"Bank owned property, being sold as is.Special addendum required once terms have been negotiated. Exempt from NC Property disclosure due to foreclosure. No survey available. Cash buyers need proof of funds."  Please, let's cut to the chase.  Just give us the addendum and let's get the party rolling.  Better yet, post the addendum in the MLS docs so we can show it to our Buyers before seeing the home.  They need to see that there is paperwork that will override most of the buyer protections built into the standard NC Offer to Purchase and Contract.

"Available for ********** Financing. Call Agent Help Desk for more information *******. No appraisal required. Home has been repaired but is being sold as is. Exempt from NC Property Disclosure due to foreclosure. Seller is ********. No survey or history of property available. Special Addendum required once terms have been negotiated."   And again: Please, let's cut to the chase.  Just give us the addendum and let's get this party rolling.  Another note:  Watch out for the Seller who will finance without appraisal.  That is a common hook in Lease/Option scams.  What is the place really worth?

"Bank owned property, sold AS-IS, no property disclosure.See attached ADDENDUMS in MLS docs.******** PREQUAL or proof of funds required..."  Whooooo, Doggie!  "Attached addendums in MLS docs..."  Good job!

"...Plumbing leak in crawl space will not be fixed by Seller..."  Sniff test? 

"Subject property is being sold in 'AS-IS' condition seller will not provide transfer disclosure or survey, call listing agent for information on seller deed restrictions"  You aren't getting a General Warranty Deed, for sure.  But that is typical of foreclosures.  Hire a sober closing attorney who will sweat bullets over the title search.

"The property is being sold 'as is'. The property is exempt from the residential property disclosure statement.There is no history or survey on file. The property will convey via 'special' warranty deed. Call for addendums prior to writing an offer."  "Special Warranty Deed spelled out.  Now if we just had the addenda posted on the MLS docs.

Most foreclosure homes are listed at 75% to 90% of ARV, After Repaired Value.  Some are actually listed at the retail value, despite needing thousands of dollars in work to make them habitable.  The one I was in last week with all the windows taken apart and laying on the floor comes to mind. 

You'll need a sharp razor to slice a profit off many of them.  To the retail Owner-Occupant Buyer, "profit" is the equity gained in the home after repairs and updates.  It is your reward for taking the risk of purchasing a compromised property.  You deserve some profit, but you'll bargain hard to find it.

Posted by

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Scan the QR Code with your Smartphone to Email MeQR CodeMike Jaquish, REALTOR®

919-880-2769 www.RealtyArts.com

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Independent Broker/Owner, Realty Arts

130 Towerview Court,

Cary, NC

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Rainmaker
123,452
Rebecca Savitski
BSR Real Estate Group - Cary, NC
NC Real Estate Listings

You are so on the money.

But on the other hand the quality of foreclosures are improving over the recent months. I have been surpised pleasantly surprised at a few properties.

Sep 14, 2007 12:31 AM #1
Rainmaker
786,657
Mike Jaquish
Realty Arts - Cary, NC
919-880-2769 Cary, NC, Real Estate

Rebecca,

I see some of that too.  Some of the REO folks have apparently determined that they need to market a better product.  But don't those tend to be expensive homes?

And, unfortunately, I think some folks have loved their homes to the day they have lost them, a sign of foreclosure getting past the prototypical deadbeat and into the mainstream of homeowners.

Thanks for stopping in...

Sep 14, 2007 12:37 AM #2
Ambassador
1,508,482
Renée Donohue~Home Photography
Savvy Home Pix - Allegan, MI
Western Michigan Real Estate Photographer

My personal favorite: "Short Sale Subject to Bank Approval.  DO NOT Disturb Tenants.  Write Offer Subject to Interior Inspection.  Call LA for Details Prior to Writing Offer"  My interpretation after Listing Agent never calls:  The client has the home for sale because they are in pre-foreclosure mode, they just want to hold on to it a little longer and are not really motivated to sell.

I always wonder if the tenants know what is up. 

Sep 14, 2007 01:02 AM #3
Rainmaker
786,657
Mike Jaquish
Realty Arts - Cary, NC
919-880-2769 Cary, NC, Real Estate

Good one, Renee!

Just wait until the sheriff puts the tenants goods on the curb one day.  If that's how you do it in NV.

Thanks for reading and commenting.

Sep 14, 2007 01:20 AM #4
Rainmaker
513,552
Leigh Brown
Leigh Brown & Associates, RE/MAX Executive - Charlotte, NC
CEO, Dream Maker - Charlotte, NC

You left off my favorite Agent Remark: "Listing agent is not responsible for any information on this listing.  Buyer must verify everything."  Which is a clear cut violation of our local MLS, which says that no matter WHAT you say, the listing agent still bears responsibility for what's in that listing.  Makes me wonder why these agents even take these listings if they refuse to verify anything and then want to hide from all liability.

Sep 14, 2007 02:07 AM #5
Ambassador
3,674,552
Patricia Kennedy
RLAH Real Estate - Washington, DC
Home in the Capital

I had some friends who bought a "one-bedroom" unit at a foreclosure sale.  They were not able to inspect it before the sale.  And when they were the lucky high bidders, they could not find the bedroom.  Oops!  You're right!  These are not for most of the home buyers out there.

Sep 14, 2007 02:10 AM #6
Ambassador
1,508,482
Renée Donohue~Home Photography
Savvy Home Pix - Allegan, MI
Western Michigan Real Estate Photographer

They usually have a couple of days to vacate and since I actively work rentals I get that call once or twice a week.  It's sad!

I know what's up, I wonder when the banks will get savvy? 

Sep 14, 2007 02:20 AM #7
Rainmaker
786,657
Mike Jaquish
Realty Arts - Cary, NC
919-880-2769 Cary, NC, Real Estate

Leigh,

Agency responsibility is the most abused professional standard, isn't it?

Patricia,

"A pig in a poke?"

Sep 14, 2007 03:04 AM #8
Rainmaker
786,657
Mike Jaquish
Realty Arts - Cary, NC
919-880-2769 Cary, NC, Real Estate

Renee,

And I suppose the tenants are current with their rent quite often and just abused by the proceedings.

Sep 14, 2007 03:05 AM #9
Rainmaker
643,145
Marchel Peterson
Results Realty - Spring, TX
Spring TX Real Estate E-Pro
Mike, Loved your post!  Very timely as I am negotiating a foreclosure right now and we can't get the addendum's until everything is agreed upon.  The home was built in 1998 so that is a good thing.  It appears to mainly need cosmetic stuff.  We have agreed to the terms and are just waiting for the bank.  Once we get the addendum's signed my clients can get their inspections scheduled.  With no disclosures they need a really detailed inspection done so they will have an idea of what they are getting in to. 
Sep 14, 2007 03:18 AM #10
Rainer
133,350
Susan Trombley
Trombley Real Estate - Wake Forest, NC
Broker/Realtor, Raleigh, Cary, Wake Forest, Youngs

I just saw the home under tax value because they know they have a problem with the home. Mold in the duct work under the home.

Yes, I to am seeing the docs having the addendums so you are not chasing down the agent for them.

But, I also am seeing that the bank is asking for the earnest money to be certified funds and this money really does not go to them as it does to the listing agents firm.

Sep 14, 2007 03:38 AM #11
Rainmaker
786,657
Mike Jaquish
Realty Arts - Cary, NC
919-880-2769 Cary, NC, Real Estate

Marchel,

I've seen some pretty grisly stuff from 9 years ago!

Susan,

Anything to streamline.

Mold in the ducts?  U-G-L-Y!

Sep 14, 2007 09:39 AM #12
Rainer
71,795
Rita Taylor
None - Sanford, NC
Sanford NC Real Estate - Homes for Sale in Sanford North Carolina

Mike,

My favorite recent one noted in the agent comments that the house had black mold inside so be careful.  I had an investor last year that I would send stuff to and he would frequently comment that some of the foreclosures needed demolition instead of renovation.  You really have to be careful with foreclosures. 

Sep 17, 2007 01:39 PM #13
Rainmaker
786,657
Mike Jaquish
Realty Arts - Cary, NC
919-880-2769 Cary, NC, Real Estate

Rita,

I liked the one last year in Raleigh that said, "Don't forget a drill to unscrew the plywood over the door."

Sep 17, 2007 02:07 PM #14
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