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Thread: Capitalizing on foreclosures and government-seized properties?

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    Elite Member ariesallover's Avatar
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    Default Capitalizing on foreclosures and government-seized properties?

    Not that I plan on doing this anytime soon, lol. I sure don't have the money. I'm curious though.

    I do hear people talking about buying homes cheaply this way and scouting for these kinds of sales.

    How does it work? Seems like there has to be a catch. Anyone have experience?
    "I ransacked his drawers when he left me by myself at his place for the first time. That's how we did it in the good old days. Tells me all I need to know about him. He pretends he didn't notice. That's how good relationships start." - Chilly Willy

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    Elite Member DeadDwarf's Avatar
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    There are a lot of foreclosures in my area (coastal Southern California). But unfortunately, right now there are not a good deal.

    People are so happy to have the prices finally a little lower they are actually bidding up the prices of foreclosures, which usually start at 20% lower than non-foreclosure homes. So the selling price of a foreclosure is usually about the same as a non-forclosure listing.

    We own a home now but it is near a busy street and it has a very small backyard. We are waiting for the market to get even crappier before we buy another home. We are keeping our house now as a rental because we have already paid off the mortgage. It's already a good investment.

    In our area the market will probably bottom out later than other markets. I think all these people buying foreclosures now are going to wish they waited because it's defintely going to get worse in our area. On my street there are 8 homes for sell, and 6 of those are bank owned. And loans are going to reset soon so all these people without fixed rates are going to be screwed and the gov't plans don't allow everyone to refinance and keep their home. The average income in this area is $60k a year, and the average loan is over $500k. And most of these people put nothing down and have to pay crazy amounts in property tax. I assume a lot of these people that make an average of $5,000 a month, pay over $3,500 a month for their mortgage and property taxes. How long can that possibly last, especially when their adjustable rate mortgage is going to go up? Lose your job for a few months and you will get a notice of default and the next thing you know you are being foreclose upon.

    Also a lot of time auctions aren't that great of deals, because people bid up the price and then you have to pay a fee to the auctioneer (sometimes 10 to 15% of the final auctioned price). That's a lot of money when you are bidding on a home that is $300k or more! And most of the foreclosures that are 3 bedrooms/2 baths around here are in the mid 400's still!

    Hopefully in the next 18-24 months we will be in our new house!

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    Elite Member louiswinthorpe111's Avatar
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    Right now, with interest rates being so low, anyone that has and ARM is seeing their rates go down. Mine just went from 5.375 to 5%, that's now fixed for the next 12 months. This is why refinances have dropped off the past couple of months, because no one's interest rates is going up.

    The main problem will occur when the Fed raises interest rates to combat inflation. Then people are going to start to feel the pain.

    As far a purchasing foreclosures, you need to be very careful when purchasing at auction time. Now, everyone has laws a little different, so check out where you are at. But, generally, houses selling at foreclosure auctions are not guaranteed to have clear title. Meaning, if the previous owner owed back taxes, and a lien was placed against the property, and you purchase it at auction, the lien is now your responsibility to pay. So if you get a deal on a house at $300K, but then find out later there's a lien against it for $100K, you now have to pay that $100K. So, you kinda need someone you know to work for a title company so they can run a title search for you and you can learn the home's history.

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    Elite Member Sojiita's Avatar
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    Anyone capitalizing on the foreclosures, and the misery and suffering of others, should rot in the very hottest part of hell, like some sick vultures picking on the dead flesh of carrion, they should be sunk into the very center of damnation. I hope all the sick fucks preying on the shattered hopes, dreams, and lives of the people unfortunate enough to have lost their homes this way all get terrible sicknesses and die. LOL(or course) *.


    *but not really.
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    Elite Member ariesallover's Avatar
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    Quote Originally Posted by louiswinthorpe111 View Post
    But, generally, houses selling at foreclosure auctions are not guaranteed to have clear title. Meaning, if the previous owner owed back taxes, and a lien was placed against the property, and you purchase it at auction, the lien is now your responsibility to pay.
    A ha! Okay, I figured there had to be something sticky going on. I would assume the same with government-seized property.

    I mentioned it because people I know who previously never had a shot at owning property were finally seeing a means to do so through this method, but I thought surely there's a catch; there's never something for nothing, though hey, maybe there is a such a thing as a good deal bringing good into someone's life from a shitty situation. I hope they manage to make a go of it without taking an unexpected (or expected) hit.

    I've never had enough money to own a home, so my knowledge is from reading and talking, rather than doing and having a solid sense of what can come up. Thanks for the info.

    Quote Originally Posted by DeadDwarf View Post
    People are so happy to have the prices finally a little lower they are actually bidding up the prices of foreclosures, which usually start at 20% lower than non-foreclosure homes. So the selling price of a foreclosure is usually about the same as a non-forclosure listing.
    Heh, never thought of that happening - interesting twist.

    Good luck on your new home!
    "I ransacked his drawers when he left me by myself at his place for the first time. That's how we did it in the good old days. Tells me all I need to know about him. He pretends he didn't notice. That's how good relationships start." - Chilly Willy

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    Elite Member Just Kill Me's Avatar
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    Quote Originally Posted by Sojiita View Post
    Anyone capitalizing on the foreclosures, and the misery and suffering of others, should rot in the very hottest part of hell, like some sick vultures picking on the dead flesh of carrion, they should be sunk into the very center of damnation. I hope all the sick fucks preying on the shattered hopes, dreams, and lives of the people unfortunate enough to have lost their homes this way all get terrible sicknesses and die. LOL(or course) *.


    *but not really.
    Not everyone who has their home foreclosed is a victim of predatory lending. I've done so many closings when I've gone over the settlement statement and I've seen the loan applications; alot of these people knew what they were doing when they got SISA (state income stated assets) loans and subprime loans. They did not have to get the huge house; they could have fixed their credit and WAITED. There are mortgage brokers that were assholes but so were the borrowers knowing full well they were taking a too big a bite. Now if the people buying up foreclosures happened to be brokers reviewing the most horrid loans in their area or passing that info along that would be pretty fucking awful. It's pretty smart financially and it's a good way for alot of people who couldn't afford homes but have been saving up to get one.
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    Elite Member Sojiita's Avatar
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    Quote Originally Posted by Just Kill Me View Post
    Not everyone who has their home foreclosed is a victim of predatory lending. I've done so many closings when I've gone over the settlement statement and I've seen the loan applications; alot of these people knew what they were doing when they got SISA (state income stated assets) loans and subprime loans. They did not have to get the huge house; they could have fixed their credit and WAITED. There are mortgage brokers that were assholes but so were the borrowers knowing full well they were taking a too big a bite. Now if the people buying up foreclosures happened to be brokers reviewing the most horrid loans in their area or passing that info along that would be pretty fucking awful. It's pretty smart financially and it's a good way for alot of people who couldn't afford homes but have been saving up to get one.
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    Elite Member ariesallover's Avatar
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    Quote Originally Posted by Just Kill Me View Post
    Now if the people buying up foreclosures happened to be brokers reviewing the most horrid loans in their area or passing that info along that would be pretty fucking awful.
    How do people research to find these kinds of foreclosed or government-seized property?
    "I ransacked his drawers when he left me by myself at his place for the first time. That's how we did it in the good old days. Tells me all I need to know about him. He pretends he didn't notice. That's how good relationships start." - Chilly Willy

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    DH and I have a real estate brokerage and 90% of our business is from foreclosures. I don't have a lot of sympathy for people loosing their homes. We take about 10 new listings each month (we get our listings straight from the lenders), and 95% of the time the people losing their homes just didn't understand the terms of their mortgage, or bought a more expensive home than they could afford. I can only recall three times where the situation was due to a spouce dying or becoming disabled.

    Anyway, you have gotten some great advice. Title issues frequently come up, and so do leins. However, when that situation comes up, we can usually get the lenders and title companies to work together to get that taken care of.

    There are some foreclosures that truly are a smoking deal, and you just have to either know your market, or have a realtor (who specializes in foreclosures) to know the market.

    Also, when you go into your lender to get approved for a loan, be sure to tell them you are looking into foreclosures. There are a lot of lending programs that require the purchaser to live in the home for X amount of months or years (so you can't "flip" the home). Also, some require that the home hadn't been sold in X amount of months (so that it wasn't a "flipper").

    It can be overwhelming, but very exciting! Good luck!

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    Elite Member louiswinthorpe111's Avatar
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    One other note with foreclosures, most are sold in as-is condition, so if you get an inspection and they tell you what's wrong with the house, don't expect to ask for a credit from the lender to fix the problem.

    Also, I know in MY county, for foreclosures that are purchased at auction at the courthouse steps, you have 24hrs to come up with the money. Most lenders can not come up with the money that quickly unless you have already set up a substantial line of credit somewhere.

    Best advice is wait until no one bids at auction and wait for it to get listed with a broker. If the lender is selling through a broker, then it's guaranteed to be clear title.

    Quote Originally Posted by ariesallover View Post
    How do people research to find these kinds of foreclosed or government-seized property?
    Any properties being foreclosed are a matter of public record. There are many websites out there that will sell you that information. Or, you can contact your county assessor or sheriff's office to see whom handles the sales or if there is an online listing with the dates. For my county, it's updated weekly online.
    Last edited by Tati; August 28th, 2008 at 09:30 AM.

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    Elite Member darksithbunny's Avatar
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    Quote Originally Posted by Sojiita View Post
    Anyone capitalizing on the foreclosures, and the misery and suffering of others, should rot in the very hottest part of hell, like some sick vultures picking on the dead flesh of carrion, they should be sunk into the very center of damnation. I hope all the sick fucks preying on the shattered hopes, dreams, and lives of the people unfortunate enough to have lost their homes this way all get terrible sicknesses and die. LOL(or course) *.


    *but not really.

    That was the problem I was having when we were looking for homes. A lot of foreclosures and that was all they wanted to show us. I refused. I could not do it. That was someone's dream that died a violent death. I do feel bad for them BUT I could have done it too and chose not to overextend myself. I had to live in a very small house was only one step away from a cardboard box on the street. We suffered for living this way. Couldn't afford to buy but rent was starting to get kinda pricey. We lucked out and found a house owned by people who just retired and was moving south. Wanted to get out quick and so we got it. It is also too small but all we can afford right now but is better than renting.

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    Elite Member ariesallover's Avatar
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    Thanks for all the insights, folks. You've satisfied my curiosity.
    "I ransacked his drawers when he left me by myself at his place for the first time. That's how we did it in the good old days. Tells me all I need to know about him. He pretends he didn't notice. That's how good relationships start." - Chilly Willy

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    A*O
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    So if it's "immoral" to buy a foreclosed property what are we supposed to do with these homes. Leave them empty and boarded up as monuments to people's poor financial judgment?

    I'm sorry but there's no place for sentimentality in real estate and one person's loss is another person's gain. How many people who've never had a hope of finding an affordable property can now do just that.

    Sure, there are cases of genuine hard luck and shitty circumstances but a LOT of foreclosures are the inevitable result of people's greed, unrealistic aspirations and, sorry to say it, stupidity.
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    Quote Originally Posted by A*O View Post
    So if it's "immoral" to buy a foreclosed property what are we supposed to do with these homes. Leave them empty and boarded up as monuments to people's poor financial judgment?

    I'm sorry but there's no place for sentimentality in real estate and one person's loss is another person's gain. How many people who've never had a hope of finding an affordable property can now do just that.

    Sure, there are cases of genuine hard luck and shitty circumstances but a LOT of foreclosures are the inevitable result of people's greed, unrealistic aspirations and, sorry to say it, stupidity.
    ITA

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    ^^Yes, I'm quite tired myself of hearing about the 'mortgage crisis' that really was primarily dumb assholes biting off more than they could possibly afford to pay for. It's another example of the modern 'no personal responsibility' disease that is so endemic.
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