bought my first foreclosure yesterday, despite BP advice ;c}

bought my first foreclosure yesterday, despite BP advice ;c}

Mark UpdegraffBusiness Member
Real Estate Broker · Rochester, NY · Member since 2010 · 1k+ posts · 690 votes

Well, first off I just reached one of my 2010 goals - to purchase a foreclosure on the court house steps!

I've been going to all auctions with meat and watching the big boys bump knuckles. You know, the stuff in the burbs that retails around 150 - 350k. Not wanting to put that much skin in the game straight off, and also wanting to stick to my buy hold rent SFRs in a fast appreciating hot RE market, I purchased a 2100 sq ft SFH on a very large city lot (66 x 150). The house was vacant, so I poked around quite a bit, though I couldn't gain entry. The walls look good, from what I could tell (recently painted) and the windows are replacement vinyl, the roof looks good. Doing my due dil turned up this: buyer paid 55k in 95 (neighborhood was not what it is today - ie drugs & crime) - owner occupied, and put some money into it. Judgement was for 96k, but they opened at 84 and went to 86,6. Being a newb and all, I wasn't sure if I should bid as it was just me there, oh, and a younger lass who wants to buy the house, but doesn't have capital to play the game. by her look, I'm sure she would qualify for FHA / conventional though (yup, got her number for possible flip). So I can the attorney for the bank and say, "hey, I'm sitting here on the steps and there are no other bidders... I'm tempted to pass, can I make another offer after." I got some run around, but basically they said "yes, you can put it in writing and send it over, but it will take time, and there are no promises." Anyway, knowing the street, and the neighborhood, I didn't want some realtor putting a number in the banks head (higher than the 86k I'm sure) so I opted to take my certified funds and buy the sucker. Now, I know that because my friends the big boys were not there, that this isn't the best deal that can be had on a regular basis. They're looking for 50c on the dollar and less, holding for short times, and reselling for market rate. This was about 60-70c on the dollar, depending on who you ask. You ask me and I'll say that it may be that now, but in 5 years, I'm going to be really happy. So why all this post? Well basically, I think it really comes down to what you know, and your gut. My SFRs are all in this area so I can package them up nice when it is time to exit. I have 2 others on this street. This has a garage at the very back of the large lot, that has a dead end street the buts up to it, AND it has a gate to my lot!! Now I have a place to store stuff where I won't get in my Tenant's way! I've got ample space to build if I want. Plus I checked with the city prior, and I can legally convert this SFR into a duplex.
Anyway, living and learning, and loving BP - just wanted to let you all know I'm very excited to have hit a 2010 goal already! Can't wait to check a few more boxes off my list.
Comps in this area tell me that I could flip it for 120 without doing anything, and in about 1 week on the market.

Feel free to comment / advise etc.

Cheers!
Mark

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Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
16y

Mark,

Where is the BP thread that makes you say "despite BP advice"? Please post link if you can.

I personally favor those where nobody else is bidding (those are cheaper!), but I am aware of somebody else posting here to not bid unless you see others bidding - HOGWASH! Just be certain of your own due diligence before opening your mouth to bid.

I think you need to buy lower at foreclosure auctions, but if the numbers work for you...

See this reply in the discussion

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  • Mark UpdegraffBusiness Member
    OP
    Real Estate Broker · Rochester, NY · Member since 2010 · 1k+ posts · 690 votes
    16y
    Originally posted by Vikram C.:

    I would normally be willing to pay the IRS some amount in order to avoid the delay. But my concern, as Steve pointed out, is that if I contact the IRS with a view towards a settlement, it might alert them to the idea that the property has substantial equity in it. They might therefore decide to exercise their right of redemption whereas they may have ignored it had I not contacted them.



    This is exactly what my attorney would say, and I agree 100%

    Do not contact the IRS, do not do ANY improvements to the property until the right of redemption has expired.

    If they DO happen to call you, be agreeable when possible (in my case I was OK showing them the inside). Don't make any offers to them. Act like you don't really care if they exercise their right. Then just wait. DON'T follow up in any way.

    Originally posted by Vikram C.:

    But from Mark's conversation with the IRS guy, it seems like:

    1. The IRS does look at these properties if the buyer is an entity, so my idea that they may somehow not notice my property is not realistic.


    Yes, but the size of the lien is also a factor. I would guess that smaller liens would tend to settle, and larger liens would require the IRS to find a buyer.
    Originally posted by Vikram C.:

    2. The IRS does not actually pay the owner and take the property. Instead, they try to sell the property to an end buyer and give the owner a right of first refusal. This is good to know because many of these properties will be hard to sell, especially if my crew can get started with the rehab and leave everything half-finished.


    Yes, the IRS man told me that they could recover more money even by offering it to me at a lesser price due to the costs involved in selling, and I would have the option.
    Originally posted by Vikram C.:


    3. The IRS is often willing to settle the right for a small amount.
    I think that will depend on the amount owed. If they are owed 70K (as in my case) I believe they're looking for a buyer so they can recover a much larger portion of what is owed (regardless of who ends up with it).
    Originally posted by Vikram C.:


    Mark, please correct me if I misunderstood any part of your post. Also, can you give us an idea about how long it takes the IRS to come check out the property, work out a settlement, etc? As a government bureaucracy, I would think that it may take a couple of months even to get to a settlement.


    From the lips of the IRS "No news is good news"

    It depends on their strength in the position.
    House purchased for 10K when comps in the neighborhood are 200K and the taxes owed are 50K? They will come see the property quick. After that who knows!! maybe it just sits on his desk! ha, where is their buyers list?

    He was telling me about where the IRS list properties for bid etc http://www.treas.gov/auctions/irs/cat_Real8.htm

    But I never saw mine there?!?! So really, I have no clue
    ;-)

    MC

  • Real Estate Investor · Phoenix, AZ · Member since 2009 · 1k+ posts · 1k+ votes
    16y

    Mark, thanks for the detailed reply. It has been very helpful.

  • Mark UpdegraffBusiness Member
    OP
    Real Estate Broker · Rochester, NY · Member since 2010 · 1k+ posts · 690 votes
    16y
    Originally posted by Vikram C.:
    Mark, thanks for the detailed reply. It has been very helpful.


    Any time! Glad to be able to give back a little to BP

    :D

    Happy Labor Day!
    Mark

  • Mark UpdegraffBusiness Member
    OP
    Real Estate Broker · Rochester, NY · Member since 2010 · 1k+ posts · 690 votes
    15y

    Hey Kids, I had to dust off this thread to share some pictures of the foreclosure POST renovation!! Almost 1 year of holding this beast! Though we had a ball!!

    Check out the pics here:
    [LINK REMOVED]
    (Click on the photo's link)

  • Landlord · Seattle, WA · Member since 2010 · 3k+ posts · 1k+ votes
    15y

    Nice work. Thanks for sharing the photos and the experience with us. Have you sold the place yet?

  • Mark UpdegraffBusiness Member
    OP
    Real Estate Broker · Rochester, NY · Member since 2010 · 1k+ posts · 690 votes
    15y

    Thanks Charles, We leased the space out (March 1st). It fits our cluster of rentals perfectly! They're also leasing the garage for an additional $200 / month, so I'm glad we got everything done.

    I never converted it to a R2, and the city took my zoning away, now I'm just an R1. Cashflow wise it will hurt in the short term, but I also see how more R1 zoning helps the feel of a neighborhood. In ROC city they allowed the conversion to multi family of many homes back in the 70's, which really brought down a lot of old historic neighborhoods with cramped quarters in large old estates.

    Cheers,
    Mark

  • Nashville, TN · Member since 2009 · 37 posts · 3 votes
    15y
    Originally posted by Sam M.:
    Yikes! You really didn't check lien position. That could end up being the most expensive lesson of your life.
    I hope for your sake it was a first position lien foreclosing.

    Back taxes can get you too!

    Sam, what does this mean? What is a lien position? Is this like a double mortgage on the house or something? Also, how do you get stuck with back taxes? The taxes stick with the house? And how do you look into this information?

    Thanks,
    Reid

  • Mark UpdegraffBusiness Member
    OP
    Real Estate Broker · Rochester, NY · Member since 2010 · 1k+ posts · 690 votes
    15y

    The lien position is established based on when the lien was filed. If it was filed before all other liens it is in first position... if it was filed after the first, it is in second and so on. You can look up the filing date at the county courthouse. You'll have to follow assignments back to the beginning to determine their position. If it is first position that is foreclosing, all other liens are wiped out / eliminated EXCEPT the IRS. If there is an IRS tax lien, it stays for 120 days after the foreclosure auction but they only have "right of redemption" - meaning they can take back the house from the foreclosure purchaser and try to sell it for more that was paid. They then pocket the difference and give the investor their original sum back. If the investor has poured any more money into the property in the mean time.... it is LOST.

    Be careful. There is a lot of info in this thread, and I believe Steve included a few other important links.

  • Nashville, TN · Member since 2009 · 37 posts · 3 votes
    15y

    Thanks for the followup Mark.

  • Knoxville, TN · Member since 2014 · 116 posts · 57 votes
    11y

    @Mark Updegraff 

     Hey Mark,

     Mind giving an update on this property?  Still a rental or have your sold it?  If you sold it wanna share your numbers?  Are you still glad you went against "BP advice" to buy it?

  • Investor · Wichita Falls, TX · Member since 2014 · 382 posts · 123 votes
    11y

    Saw this thread as well..any updates?

    @Mark Updegraff

  • Mark UpdegraffBusiness Member
    OP
    Real Estate Broker · Rochester, NY · Member since 2010 · 1k+ posts · 690 votes
    11y

    @Pat Martin @Mary lou L.

    Still rented, just turned over for the first time with no vacancy in-between.  Love the property.  The current market value is double what I paid.  Yea, I would do it again in a heartbeat.

    Cheers,
    Mark

  • Cincinnati, OH · Member since 2016 · 146 posts · 104 votes
    10y

    No reason to start a new thread. @Steve Babiak you seem to have this down, but maybe other can chime in. What does WD mean as check below? This is the online listing of our county's upcoming Sheriff Sale.

  • Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    10y

    @David Hildebrandt - I don't have 100% certainty, so this is only a guess, but my guess is that WD represents WithDrawn from that sale date. Because the vast majority of properties scheduled for a sheriff sale get some kind of postponement. 

    If you have access for the court docket records for the case numbers marked WD, you might be able to see what case activity has occurred and thus form a better guess. 

    Maybe somebody from Cincinnati or Hamilton County might know better. 

  • Real Estate Agent · Cincinnati, OH · Member since 2015 · 156 posts · 42 votes
    10y

    The Cincinnati court index has been a great $100 investment for me. Breaks all the sales down much better and has a boatload of other info too.

  • Investor · Cincinnati, OH · Member since 2012 · 506 posts · 331 votes
    10y

    @Steve Babiak and @David Hildebrandt, yes the WD column means the property was withdrawn from that sale (if the box is checked).  Happens pretty regularly and you can even call the morning of the sale to have them give you an update on a couple properties (they won't let you read a list of 10 to them, usually 2-3 is about the max).  Saves a trip down to the courthouse.

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