Buying a foreclosure home

3 Replies

Originally posted by @Christopher Hunter :

Is there any insight on buying a foreclosure home?

 A few quick notes to get your thoughts rolling...

- "They" have been saying "get a great deal by buying a foreclosure!" for some 30-odd years now. The hype is now built into the prices, "they" might have been right in decades past but they are not correct today in most cases.

- Whoever it was that got foreclosed upon wasn't making their mortgage payments. Typically, someone not making their mortgage payments also isn't maintaining the house well.

- And then, after it sits vacant for a while, squatters and robbers often break in. Pipes, ovens, etc, often get stolen.

- REO sellers typically are unwilling to negotiate repairs or anything else. And they won't let you fix anything to bring the property up to good enough condition where you can get a traditional mortgage on it, if that's needed.

- Most of the low down payment owner occupant options out there, like FHA and VA, have higher property standards than conventional mortgages, which in turn have higher property standards than hard money lenders have.

- Most of the time, for the above reasons, the "killer deal" REO transactions are killer deals in terms of sticker price because the buyer is using a HML where it's ok that the property has it's plumbing torn out, etc. None of the people only using traditional financing could buy it, pool of buyers significantly reduced, and down comes the price.

- Some REO props are in decent shape, and you can get a traditional mortgage on it. But now you're up against 50,000 other people that heard "them" say "get a great deal, buy a foreclosure!" just like you did -- and there went your opportunity to get a great deal on it, poof, gone, too much competition, sometimes it's even worse than a vanilla listing on the MLS because those ones don't have all that false hype around them.

Soooo, yeah. Not trying to dissuade you, and my "most" and "almost always" type comments get proven wrong all the time by folks who beat the odds, work the angles, and do it anyways, but that's the context you are walking into. :)

IMO, look at REOs just like any other listing where you know the seller isn't willing to negotiate with you on repair items.

If you want to see what a particular bank or entity has listed, you can google "BankName REO" and it's usually the top result. "Bank of America REO," "HUD REO," "Fannie Mae REO," "Wells Fargo REO," etc.

@chrismason

If I am not using private money should I check with 1 or 2 lenders to see what I can qualify for? Do I need to shop for lenders in the state I want to buy property in?

Originally posted by @Christopher Hunter :

@chrismanson 

If I am not using private money should I check with 1 or 2 lenders to see what I can qualify for? Do I need to shop for lenders in the state I want to buy property in?

Generally it is best if your lender is local to the state you are buying in, yes. Our licensing/etc is tied to the location of the real estate, not to your personal physical location.