Is a Foreclosure the right choice for you?

By
Managing Real Estate Broker with Flexit Realty "Flexible Home Selling Solutions"

We can summarize foreclosures in three distinct groups...Owner Occupied, Non-Owner Occupied and Bank Owned.

This may greatly affect the type of loan you can qualify for and a couple of other key issues.  These home are usually "AS IS" which means if you do not have some extra cash you could be buying a "Money Pit" where your extra money is soon gone!

foreclosureThe reason your hidden costs for repairs can sky rocket is the owner and lender has not or will not do anything more to the property once foreclosure status has been started.  So routine maintenance soon becomes required maintenance. These repairs can be wide ranging or very simple...but only an inspection with a qualified inspector will give you the real scoop on what needs to be done.

Hidden mold from a leak or moisture can be something difficult to find the source but greatly impact your families health.  Many of these homes do not have any electricity or water available to check the plumbing and electrical.  This can lead to unknown surprises like broken or missing pipes in some cases.  One home I was told the vacating family used a chain saw to the walls and took all the wiring another took all the copper pipes for scrap value.  These may be exceptional cases but happen more often than you think.money can fly

So some of these so called "good deals" can have dollars flying out the of your wallet faster than you can make them.  You know you will have to paint, carpet and even replace fixtures and appliances in most cases.

Hot water heaters, furnaces and air conditioning units are not cheap but may need repair or replacement.  Once thing you can count on....they have not been maintained even with basic inspections.

FHA/HUD do not do any repairs, they may cover a leaky roof so no further damage occurs...but by that point it is already a major issue.  So FHA/HUD looks at the home "AS IS" only and discounts homes around 40% of value.

Fannie Mae looks at home from two viewpoints...one "AS IS" and the other "As Repaired" for appraisal value.  Fannie Mae decides if they can market the home and minimize their loss or do a quick repair and sell the home or market the home "AS IS" if the repair is to costly and not worth the return they can get when the home sells.

Two very different approaches.

Finally there is the bank owned properties.  The bank s may try to sell properties for what is owed or dump it.  This depending on costs, repairs and the market.

getting a loanGetting financed is not always as easy on homes like this if you have bruised credit.  So get with a lender and get your credit issues resolved before you begin your home search.

So is foreclosed properties the right choice for you?  If you go into the purchase of a foreclosed property with your eyes wide open and a budget in mind for the repairs it could be just what you are looking for in a bargain home.  If you are anhappy to meet you investor this may be the opportunity to expand your portfolio of properties.

This is a quick overview to help you evaluate if Foreclosed properties are the right choice for you to pursue.

If you live in Michigan and would like a free list of HUD homes available we are a HUD Authorized Broker.  Call: Toll Free 877-667-4699 Email: garywhite@grar.com  or go to our Website: www.FlexItRealty.com

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is a foreclosure right for you investors can do well with a bit of time and review with foreclosed properties

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Rainmaker
115,244
Susan Hilton
CENTURY 21 Beal, Inc. - College Station, TX
Texas Aggie Real Estate, College Station Bryan Texas Real Estate

We sell the most foreclosures in Bryan & College Station, Texas and we see a bit of everything! Foreclosures usually not the best buys for first time homebuyers.

www.thecenturytreereader.com

May 15, 2008 11:54 AM #1
Rainmaker
173,450
Richard Glesser
North Country Appraisal Services - Gaylord, MI

In this market area of Michigan where winter weather is extreme, it pays great dividends to find out the foreclosure timetable for the property.  Most pertinent question: When did it sit exposed to the elements before plumbing was winterized?  If during winter months, major problems are probable.

May 15, 2008 12:41 PM #2
Rainmaker
224,121
Laurie Mindnich
Centennial, CO

Gone are the days of banks pouring money into their own foreclosures (at least, so far here)- Gary, this is great stuff for buyers.

May 15, 2008 01:25 PM #3
Rainmaker
1,074,014
Gary White~Grand Rapids Home Selling Pro Call: 616-821-9375
Flexit Realty "Flexible Home Selling Solutions" - Grand Rapids, MI
Real Estate Services You can Trust!

Hi Susan, for most first time buyers the foreclosure market is not the place they should look.  They usually have limited experience in repairs and are under capitalized to hire the work done.  Thanks for the comments Susan.

May 16, 2008 03:21 AM #4
Rainmaker
1,074,014
Gary White~Grand Rapids Home Selling Pro Call: 616-821-9375
Flexit Realty "Flexible Home Selling Solutions" - Grand Rapids, MI
Real Estate Services You can Trust!

Hi Richard only a Michigander would think like that!  I might add it is very to the point and correct.  I opened an office in Freeland and another in Reed City to cover some of the markets that offer homes of this type.  I am a HUD broker and that brings some very interesting real estate properties to view with clients.  Thanks for pointing out some of the issues climates can make on properties Richard.

May 16, 2008 03:25 AM #5
Rainmaker
1,074,014
Gary White~Grand Rapids Home Selling Pro Call: 616-821-9375
Flexit Realty "Flexible Home Selling Solutions" - Grand Rapids, MI
Real Estate Services You can Trust!

Hi Laurie, you are sure right about the banks making investments into properties...those days are long gone!  Thanks for the comments Laurie.

May 16, 2008 03:26 AM #6
Rainer
67,222
Keith Perry
Coldwell Banker - Hiram, GA
REALTOR - West Metro Atlanta

Hi Gary, very sound advise here. When a buyer tells me he wants to buy a foreclosure the first thing out of my mouth is that they are going to assume all the risk in thier home purchase. Then I show them copies of various blank bank addendums from past sales to drive the point home.

 

May 16, 2008 03:31 AM #7
Rainmaker
50,938
Micheal St. Peter
The Bayshore Group - Traverse City, MI

There are great deals in the Traverse City area on Foreclosure's. Most of the properties here are in great shape with minimal repairs. The banks are being very cooperative and pricing the rougher properties very aggressively. First time home buyers using RD financing can have repair escrows set up to take care of known problems. These are great opportunities.

May 16, 2008 04:12 AM #8
Rainmaker
1,074,014
Gary White~Grand Rapids Home Selling Pro Call: 616-821-9375
Flexit Realty "Flexible Home Selling Solutions" - Grand Rapids, MI
Real Estate Services You can Trust!

Hi Keith & Robin, agents in metropolitan area that do not understand the issues faced when representing a foreclosed property can find themselves leading their clients into a very difficult property that has one thing that may look attractive...price.  Cobra's look like an passive snake as they weave to the music...but the bit is pretty deadly!  Thanks for the comments guys.

May 16, 2008 06:04 AM #9
Rainmaker
1,074,014
Gary White~Grand Rapids Home Selling Pro Call: 616-821-9375
Flexit Realty "Flexible Home Selling Solutions" - Grand Rapids, MI
Real Estate Services You can Trust!

Hi Michael, I have no doubt in your market the opportunity presented by these properties can yield some great buys.  In the larger markets we some some unique issues that cause us to be weary of properties and help people step forward with a bit of caution.  TC are is starting to look good this time of year Michael.  Thanks for the comments.

May 16, 2008 06:07 AM #10
Rainer
48,229
Ethan Dozeman
Realty Executives Platinum Group - Grand Rapids, MI
Real Estate in Grand Rapids

I like short sales, they tend to be in better shape...

May 21, 2008 04:39 AM #11
Rainmaker
173,450
Richard Glesser
North Country Appraisal Services - Gaylord, MI

I'm not sure how Realtors are selected to market the REO properties but they vary dramatically.  I'm a bit disgruntled with some who list all the properties far below market value.  I know of one who appears to list at 50% the SEV which, in Michigan is 25% the actual value.  I'm sure it appeals to the lender from the quick sale aspect, but it's devasting in the marketplace.  The buyers of these also do quite well but it appears that some landlords are buying up many and not doing the proper repairs and renovations.  Nothing better for a market area than pride of ownership, not often found in those who own many rental units.

May 21, 2008 04:50 PM #12
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Rainmaker
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Gary White~Grand Rapids Home Selling Pro Call: 616-821-9375

Real Estate Services You can Trust!
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