What do I have have to do to buy a foreclosed house?
I am 18 years old and I have a few dollars saved up.What exactly do I have to do to own a foreclosed house? In Brooklyn, NY about how much will it cost for me to buy a foreclosed house? And after I own it how do I go about selling it for profit?
By a foreclosed house do you mean what is called a Real Estate Owned Proporty (REO) that the bank bought back at the Trustee Sale or do you mean actually buying a property at the Trustee sale? If you mean a REO property, the lenders list those properties with a Real Estate Broker. Those properties are listed on the Multiple Listing Service of the Real Estate Brokers. If all you want to do is buy a REO property you can contact any Real Estate Broker and they will be more than happy to sell you one of the overpriced REO properties in their inventory. Those properties are generally overpriced for what they are. The properties are generally sold “as is” and generally have $100,000 to $200,000 in damages and deferred maintenance that needs to be repaired.
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Generally the banks overprice these properties. They usually only allow a discount of $40,000 to $50,000 for the damages, even though the amount of the damage will cost $100,000 or more to repair properly. The REO properties are priced less than the other properties in the neighborhood because the REO properties need an enormous amount of very expensive repair work. Unfortunately the REO properties are not discounted suficiently to compensate for all of the work that is needed. The banks are already losing money because they made loans for more than the house was worth. In General the properties that are in good condition that you can find on any Multiple listing Service are better values than the bank owned REO properties, as long as you negotiate the price properly so that you pay fair market and nothing more for the property. There is a very detailed list of guidelines that I have written in answers to various questions on this site and that I will publish in a book that I am writing about successful real estate investing. I will not repeat those guidelines here, because I have listed them already on my answers to many other questions on this site. If you want to see my guidelines, I refer you to my answers to previous questions on this site. If you follow the guidelines that I have prepared anyone can purchase a property at its true fair market value and not a penny more. (That in itself is quire an accomplishment) Most people pay far too much for a property because they do not understand how to negotiate. I give you detailed step by step instructions that anyone can follow to negotiate true fair market value, and not some ridiculously over priced number that most people pay when they purchase a house. The banks have been putting out a lot of publicity about how great a deal their REO properties are. The reason that he banks do that, is that the banks want unsophisticated people to think that the REO properties are a good deal so that the banks can sell those properties for more than they are worth and recover some of their losses. Also do not be fooled by the marketing hype that promises property for “pennies on the dollar”
“>I guarantee you there is no such thing. Any property that is priced below fair market value will draw a number of competitive offers that will push the price back up to fair market value. In some parts of the United States the fair market value has dropped so much that when compared with the price that property would have sold for one or two years ago, the fair market value of today looks like pennies on the dollar, but is really the fair market value on today’s market, not “pennies on the dollar”. With respect to purchasin property that is currently in foreclosure, I will give you the procedure for Trustee’s slaes in the State of California where I live and where I do business. If you wish to purchase a property at the Trustee’s sale you must become very good at searching the title for liens and determining what position the lender’s interest is that you are buying. Remember, at a Trustee’s sale you are only buying the interest of the property that the lender had in that property. You are not necesarily buying the property itself. I will tell you about the case of one unfortunate young man that I witnessed here in San Jose, California. A property had been foreclosed by the lender. From my research I determined that the property had a fair market value of $350,000. The owner had purchased the property with 100% financing for $390,000. The owner had already paid $40,000 to much for the property and the lenders of the first and second mortgages had lent $40,000 too much on the property. The lenders made a loan in first position of $312,000 and a loan in second position of $78,000 for a total of $390,000. The homeowner had not made payments for about six months by the time this property came to the Trustee’s Sale. The unpaid interest and penalties added to the loans had inceaased the amount of the first to be almost $350,000 by itself. As it happened the lender in second position was the first to file for foreclosure and was the first to make it to the Trustee’s sale on the courthouse steps.. The amount owed on the second by this time was approximately $90,000. The Trustee opened the bidding at $20,000. A young man bid the $20,000 and bought the interest of the holder of the second loan. That meant that he also had to pay off the holder of the first loan. The amount of the first with interest and penalties was already $350,000, the fair market value fo the property. Essentially the young man had just paid $370,000 for a property that was only worth $350,000. However the young man did not know that yet. The young man was very proud of himself. He went around to other people at the Trustee sale telling them that he had just bought a property for $20,000. Unfortunately the young man had not done his homework. He did not know about the $350,000 loan in first position that he had to pay off. It gets worse. The young man refused to pay the holder of the first. He thought that he had bought this property and it was his. The holder of the first foreclosed and bought the property back at their Trustee sale. The holder of the first submitted the loan amount as their bid. The young man lost the property to the holder of the first and essentially lost his $20,000 cash. You might be thinking “but Mike, surely the young man is entitled to a refund or perhaps he could stop payment on his check or reverse the charges on his credit card, or perhapes the title insurance policy would reimburse him for his losses.” If that is what you are thinking you are wrong. Properties sold at Trustees sales are sold without any guarantees of any kind. The only checks that are accepted at Tustee’s sales are cashier’s checks that you buy from the bank for cash. There are no refunds.. They do not accept credit cards at Trustee’s sales. There is no financing. you pay cash only at a Trustee’s sale. There are no inspections. There are no refunds and there are no contingencies of any kind. You get no guarantee of good title, you get no title insurance and you do not even get posession of the property. The previous owners are still in the property and the previous owner still thinks that they own the property. You have to evict the previous owners. Also, the previous owners often become quite upset when they discover that their house has been sold on the courthouse steps at a Trustee’s sale and they completely destroy the house. I recommend that you do not buy a foreclosed house. As an REO property it is over priced and at the Trustee’s sale there is an extraordinariuly high amount of risk and a very steep learning curve. My recommendation is to buy a property that is in good condition from a willing seller and follow my instructions to the letter when you are negotiating the fair market value price, which in most cases is substantially less than what the seller is asking for the property. However if you do not follow my instructions exactly and to the letter, and in great detail you will not get fair market value. You will pay too much if you do not follow my instructions exactly to the letter. Again, I will not repeat my instructions for how to negotiate fair market value. I have already published those instructions in many of my answers to questions in this section. I refer you to my previous answers in this section, or my book on successful real estate investing when it comes out in the bookstores in the next few months . .
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March 14th, 2010 at 10:51 pm
You will not be able to sell it for profit for at least a couple of years.
Foreclosures are sold the same way all of the other homes are sold. Through a real estate agent.
You need to be pre-approved for your loan first, banks do not even look at offers w/o that done already. If you qualify for a loan (not likely I am afraid) you then need at least 10% in cash for a deposit.
All of the other steps are pretty much handled by your real estate agent. Foreclosed homes are presently selling for about the same price they were in 2004 and 2005.
Because the market is swamped with foreclosers and short sales you will not be turing this over for a quick profit. If the market could support a higher profit the bank is obligated to sell for the highest price the market will support to cushion the blow to the previous owner as much as possible.
References :
March 14th, 2010 at 11:07 pm
Horrible idea. Find a good investment. Mutual funds work pretty well!
References :
March 14th, 2010 at 11:45 pm
Your answer lies within US Department of Housing and Urban Developement! (HUD)
Don’t get trapped as there are many websites/agents who promise to find foreclosure homes and ask for money while all information is available to public for free. An agent might be able to find a forclosure house a little sooner because he is in Real Estate business but if you are actively looking at HUD website your chances are pretty good too. So my suggestion is to keep looking at HUD and subscribe to automatic email alerts as well. Wesbite address is:
http://www.hud.gov/
( Check: "Learn how to buy a HUD home " under "At Your Service" option area – there are listings as well that you can search)
Having said all this, it does not mean I am promoting you to go there and buy a forclosure house. Always think before buying a foreclosure house "why it got into foreclosure?"
With what we are facing right now (crisis in housing market) you might get lucky finding a reasonable house listed under foreclosure; but what has happened historically is that:
- It is sad but true that such houses are not in good neighborhood (because that’s where people who cannot afford live at first place)
- It is almost certain that an owner who was not able to make payments was not able to make any repairs to the house as well. So the house would be not be in move-in condition most probably.
- This is an extension of above point that owner might have actually sold what should have come with the house so you need to inspect such houses very carefully inside-out and check thoroughly as there might have been some frauds committed as well.
Again, with today’s housing market crisis you might be able to find some good deal since I know a person who had last year.
Good luck!
QAData
References :
I am a web addict who reads just about everything
March 15th, 2010 at 12:22 am
By a foreclosed house do you mean what is called a Real Estate Owned Proporty (REO) that the bank bought back at the Trustee Sale or do you mean actually buying a property at the Trustee sale?
If you mean a REO property, the lenders list those properties with a Real Estate Broker. Those properties are listed on the Multiple Listing Service of the Real Estate Brokers.
If all you want to do is buy a REO property you can contact any Real Estate Broker and they will be more than happy to sell you one of the overpriced REO properties in their inventory.
Those properties are generally overpriced for what they are. The properties are generally sold "as is" and generally have $100,000 to $200,000 in damages and deferred maintenance that needs to be repaired.
Generally the banks overprice these properties. They usually only allow a discount of $40,000 to $50,000 for the damages, even though the amount of the damage will cost $100,000 or more to repair properly.
The REO properties are priced less than the other properties in the neighborhood because the REO properties need an enormous amount of very expensive repair work.
Unfortunately the REO properties are not discounted suficiently to compensate for all of the work that is needed.
The banks are already losing money because they made loans for more than the house was worth.
In General the properties that are in good condition that you can find on any Multiple listing Service are better values than the bank owned REO properties, as long as you negotiate the price properly so that you pay fair market and nothing more for the property.
There is a very detailed list of guidelines that I have written in answers to various questions on this site and that I will publish in a book that I am writing about successful real estate investing. I will not repeat those guidelines here, because I have listed them already on my answers to many other questions on this site. If you want to see my guidelines, I refer you to my answers to previous questions on this site.
If you follow the guidelines that I have prepared anyone can purchase a property at its true fair market value and not a penny more. (That in itself is quire an accomplishment) Most people pay far too much for a property because they do not understand how to negotiate.
I give you detailed step by step instructions that anyone can follow to negotiate true fair market value, and not some ridiculously over priced number that most people pay when they purchase a house.
The banks have been putting out a lot of publicity about how great a deal their REO properties are.
The reason that he banks do that, is that the banks want unsophisticated people to think that the REO properties are a good deal so that the banks can sell those properties for more than they are worth and recover some of their losses.
Also do not be fooled by the marketing hype that promises property for "pennies on the dollar"
I guarantee you there is no such thing. Any property that is priced below fair market value will draw a number of competitive offers that will push the price back up to fair market value.
In some parts of the United States the fair market value has dropped so much that when compared with the price that property would have sold for one or two years ago, the fair market value of today looks like pennies on the dollar, but is really the fair market value on today’s market, not "pennies on the dollar".
With respect to purchasin property that is currently in foreclosure, I will give you the procedure for Trustee’s slaes in the State of California where I live and where I do business.
If you wish to purchase a property at the Trustee’s sale you must become very good at searching the title for liens and determining what position the lender’s interest is that you are buying.
Remember, at a Trustee’s sale you are only buying the interest of the property that the lender had in that property. You are not necesarily buying the property itself.
I will tell you about the case of one unfortunate young man that I witnessed here in San Jose, California.
A property had been foreclosed by the lender.
From my research I determined that the property had a fair market value of $350,000.
The owner had purchased the property with 100% financing for $390,000. The owner had already paid $40,000 to much for the property and the lenders of the first and second mortgages had lent $40,000 too much on the property.
The lenders made a loan in first position of $312,000 and a loan in second position of $78,000 for a total of $390,000.
The homeowner had not made payments for about six months by the time this property came to the Trustee’s Sale.
The unpaid interest and penalties added to the loans had inceaased the amount of the first to be almost $350,000 by itself.
As it happened the lender in second position was the first to file for foreclosure and was the first to make it to the Trustee’s sale on the courthouse steps..
The amount owed on the second by this time was approximately $90,000.
The Trustee opened the bidding at $20,000. A young man bid the $20,000 and bought the interest of the holder of the second loan.
That meant that he also had to pay off the holder of the first loan. The amount of the first with interest and penalties was already $350,000, the fair market value fo the property.
Essentially the young man had just paid $370,000 for a property that was only worth $350,000. However the young man did not know that yet.
The young man was very proud of himself. He went around to other people at the Trustee sale telling them that he had just bought a property for $20,000.
Unfortunately the young man had not done his homework. He did not know about the $350,000 loan in first position that he had to pay off.
It gets worse.
The young man refused to pay the holder of the first. He thought that he had bought this property and it was his.
The holder of the first foreclosed and bought the property back at their Trustee sale. The holder of the first submitted the loan amount as their bid.
The young man lost the property to the holder of the first and essentially lost his $20,000 cash.
You might be thinking "but Mike, surely the young man is entitled to a refund or perhaps he could stop payment on his check or reverse the charges on his credit card, or perhapes the title insurance policy would reimburse him for his losses."
If that is what you are thinking you are wrong.
Properties sold at Trustees sales are sold without any guarantees of any kind. The only checks that are accepted at Tustee’s sales are cashier’s checks that you buy from the bank for cash. There are no refunds..
They do not accept credit cards at Trustee’s sales. There is no financing. you pay cash only at a Trustee’s sale.
There are no inspections. There are no refunds and there are no contingencies of any kind.
You get no guarantee of good title, you get no title insurance and you do not even get posession of the property.
The previous owners are still in the property and the previous owner still thinks that they own the property. You have to evict the previous owners.
Also, the previous owners often become quite upset when they discover that their house has been sold on the courthouse steps at a Trustee’s sale and they completely destroy the house.
I recommend that you do not buy a foreclosed house. As an REO property it is over priced and at the Trustee’s sale there is an extraordinariuly high amount of risk and a very steep learning curve.
My recommendation is to buy a property that is in good condition from a willing seller and follow my instructions to the letter when you are negotiating the fair market value price, which in most cases is substantially less than what the seller is asking for the property.
However if you do not follow my instructions exactly and to the letter, and in great detail you will not get fair market value.
You will pay too much if you do not follow my instructions exactly to the letter.
Again, I will not repeat my instructions for how to negotiate fair market value. I have already published those instructions in many of my answers to questions in this section.
I refer you to my previous answers in this section, or my book on successful real estate investing when it comes out in the bookstores in the next few months
. .
References :
My experience. Over 40 years investing in real estate.