Buying a foreclosed home

[Josh W]

Cross posted from OOT.

There's a house I know of. The lady who owned it died of a cocaine OD. She was in her mid 50's, and lived alone. I'm very familiar with the house, but never met the lady. I'm good friends with the previous owners. I've taken care of the house when they went on vacation, etc. And, well, I love the house. It's not too big or fancy, but has a large, nice yard, is probably about 1700 square feet, on 5/8 acre lot, 3 bed, 2 bath, 2 car garage, etc.

Since she died, the house has gone down hill. The fence has fallen over, gutters came off, downspouts ripped away from the house in a windstorm, may need a new roof as it is overgrown in moss, etc.

However, I wanna buy it. I just found out that the bank is putting it up for auction. The bank is owed 150k, but by the time it goes up for auction, it'll probably be more like 155 or 160k. However, I could either live in it, or fix it and sell it. I could probably re-sell it for around 280-320k, but it would take 20-25k of work to get it sellable.

Anybody have any experience buying foreclosed homes? Any idea how much they go for? Do I need to go to the auction with a preapproved letter for a loan? What process is involved?

Any recommendations/suggestions/advice is welcomed.

Josh

[black_russian]

I have never bought a house on auction but last year I got into it and did some research. I went to a couple and bid but lost. I live in the North East and real estate has been very hot with few forclosures. Rarely houses up for auction actually get auctioned off! At least that was my expericence. They usually get delayed and if the market is good, the owner can usually sell for more than is owed. In this case, there may be family members who will wait til the last minute to make a payment and then it will be postponed. Maybe not. Rest assured if you can pick it up for 150k and put 30k into it and sell it for 300k there are others interested. So, there were not many auctions and the 3 that I saw were auctioned went for very close to fair market value. This is not a good idea because you assume a lot of risk that you dont in a normal home purchase. As far as what you need at an auction , a drivers license and a bank check for 5 or 10k. That is all in MA and NH. Probably similar where you are but you can call the bank and they will be more than happy to share with you. However if you win the auction but cant get financing you are out that 5 or 10k you put down and the next highest bidder gets it. So be sure to be preapproved. Be sure to do your research on the property...ie are there leins (tax leins in particular...almost guaranteed). If you want to sell you may have to be sure the septic (if not public) is up to code etc.

Good luck

[Josh W]

BR -

Just a spectacular response, thank you very much.

Josh

[CCass]

At auction, I wouldn't pay more than 60-70% of the value of the house. If you think the house is worth $300K, I wouldn't pay more than $200K or so. You already know about 25K in repairs, and there is a great possibility that you are underestimating, or that there is more to fix than you realize.

[Ray Zee]

go to the bank that has it and make an offer with them financing it. thats is your best chance. andthey like that. if you go the auction route you better know the rules or you may be in for a surprise like specific performance or such if you win the bid and dont buy it. plus its as is and if you find things wrong you are stuck. house auctions are not for the newbie buyer. but sometimes can work out.

[adios]

[ QUOTE ]
At auction, I wouldn't pay more than 60-70% of the value of the house. If you think the house is worth $300K, I wouldn't pay more than $200K or so. You already know about 25K in repairs, and there is a great possibility that you are underestimating, or that there is more to fix than you realize.

[/ QUOTE ]

From personal experience that $25,000 figure seems like it does have a good possibility to be on the low side. If you have to remodal the kitchen for some reason it's definitely on the low side. Landscaping upgrades can run into more money than you might think. I think the OP was discussing repairs for the most part but it would be rare to find a house in disrepair that didn't need some upgrades as well.

[Josh W]

[ QUOTE ]
[ QUOTE ]
At auction, I wouldn't pay more than 60-70% of the value of the house. If you think the house is worth $300K, I wouldn't pay more than $200K or so. You already know about 25K in repairs, and there is a great possibility that you are underestimating, or that there is more to fix than you realize.

[/ QUOTE ]

From personal experience that $25,000 figure seems like it does have a good possibility to be on the low side. If you have to remodal the kitchen for some reason it's definitely on the low side. Landscaping upgrades can run into more money than you might think. I think the OP was discussing repairs for the most part but it would be rare to find a house in disrepair that didn't need some upgrades as well.

[/ QUOTE ]

I'm fairly confident that the 25k is not on the low side. the inside of the house is in fine shape. It's just been beaten up a little on the outside by a few windstorms (fence falling, downspouts and gutters coming loose). replacing the fence is the only expensive part, and i can do the labor myself at a minimal expense (my dad is a contractor, so i can get all parts at a wholesale price, and he lives nextdoor, so I'd also use his tools). the landscaping isn't bad, as the neighbor mows the lawn, so it's not overgrown. obviously there are weeds and whatnot. what makes this such an attractive house is i know what i'd be getting.

I think the suggestion by Zee to go to the bank will be my first strategy.

Thanks all,

Josh

[adios]

Hope you get it, sounds like a great coup if you can.

[microbet]

I've bought a few properties at auction or from banks. There are lots of different ways the properties are sold and sometimes they will go for market value and sometimes for a lot less. Who owns the property at the moment? Has the bank taken it back or the heirs still own it, but it is in default? Just talk to whoever owns it and find out what they plan on doing.

One thing that might work well in your case is that if you buy it and live in it for 2 years (I think 2), fix it up and sell it, you won't have to pay federal tax on the profit.

[microbet]

In what part of the country are you/the property located?