Should I get foreclosed on?

15 Replies

I bought a really bad property (high rehab costs, kind of bad area near Detroit), and I now have taxes owing on it (~$2,200). I'm finding that I really don't know enough to be in this business, so I want out.

I have a well-rated realtor working on selling it, but buyers keep backing out. Even if i'm successful selling it, I will have to sell at a loss, considering the realtor commissions and taxes that I will have to pay.

I'm sorry I don't know much about the foreclosure process, but what happens if I just let the taxes accumulate, and Wayne county forecloses on my property? My LLC owns the property and I bought with cash. Can I let Wayne county foreclose on it, and then open up a new LLC if I want to do more (safer) investments in the future?

MODERATOR: THIS IS NOT AN OFFER TO SELL THIS HOUSE. SOLICITATIONS WILL BE REMOVED WITHOUT NOTICE.

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You need to sell it for whatever you can. Your loss will be greater if it goes to a tax sale, as the bidders there won't be paying any where near what you can get on the open market. . You're going to lose money either way. What kind of numbers are we talking about? Also, why are the buyers backing out?

Tax foreclosure is the wrong answer. Sell it for whatever you can now.

Diana: do you own it free and clear of mortgage? If so, you may be able to sell it more easily by taking a downpayment and carrying back the balance on a note. Investor buyers often have down payments but not so many financing options.

Can you post the numbers? Purchase price, asking price and mortgage balance?

Letting the property go to tax sale is an option, but like Wayne said, you'll recover less of your investment.

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Absolutely not. Couple options:

1) list FSBO at rock bottom price. Sell with quit claim deed or land contract (owner financing) or whatever else the Detroit market will allow you to get away with. Might get lucky and a newb contractor or investor might take it off your hands.

2) list it on an auction site like Buy4Assets or Auction.com. Lots of rehabbers look for deals on lesser used auction sites, so this might be a better audience for you.

3) go to BP's marketplace to place an ad and maybe a Detroit riverboat gambler investor will take it off your hands.

If I already have it listed with a realtor, am I allowed to go on and sell it on my own?

Also, for those of you who recommended against foreclosing on it, please explain to me why I should I avoid this. I purchased the property for $6,000, and I have $2,200 taxes owing on it, So I'm willing to accept that loss.

Originally posted by @Diana B. :
If I already have it listed with a realtor, am I allowed to go on and sell it on my own?

It depends on what the listing agreement says. If the house is a dump and isn't listed for once you may just want to ask the agent if you can cancel the agreement, the agent probably doesn't stand to make much on the house and it's probably a big pain to deal with a property like that. Otherwise you'll have to either wait until the agreement expires or if you sell it on your own while the contract is still in place you would still owe the agent the agreed upon commission.

If it's a $6k property the agent will make next to nothing (unless you've agreed to a mininum commission) so if I were the listing agent I'd let you out of the listing agreement. I'd put it up on an auction site selling and disclose what the taxes are and that the buyer will be responsible for them. You can probably find another sucker and get part of your investment back

@Diana B. - what are you selling it for? What if you lowered your price to cover the taxes, commission and at least the 6k you bought it for?

I might be going against the crowd here, but tax foreclosure is a totally viable option, IMO. Especially for a $6K property with debt of $2200. For all we know, you overpaid when you bought at $6K. :) What's your asking price in the listing? Do you think your agent would let you cancel the listing so you could sell it elsewhere for the back taxes?

IMO; List it here on BP in the market place. List it everywhere you can!!! If your stuck in the agreement with the realtor who is highly rated then just pass the buyer to him. I wouldn't sweat the agreement though. His broker should give him the "really" look if he complained that you found the buyer. It would say more abouth the realtors inabilities to sell the place than your shopping for buyers behind his back.

Also, look into how fast the county is moving on their tax sales. Many counties are very slow to foreclose. This might be one of them. Then figure out how much time you have before the county comes knocking.

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I went through the same process and lost way more than that. However, whatever you do... do not quit. I learned a lot from this bad experience and I am sure you have as well. Suggestion, do not do it alone find people that know what they are doing before you buy any property. Educate your self, listen to the podcast, read books, surround your self with people that are in the business you want to get in, but most importantly "do not give up". I am not, I lost all I had and I was naive trying to do as the stuff you see on tv, never again. Good luck...

Sell it for $2000 and let the buyer pay the taxes. Always do a title search before you buy. 

Joe Gore

@Diana B.  How did this turn out?  Just curious what the numbers were.  Also,  Was it in habitable condition?  Why not rent it out and recover some of your investment that way?

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