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9/19/2017 7:27:10 PM
Posted: 2/24/2013 8:10:35 AM EDT
[Last Edit: 2/24/2013 8:51:27 AM EDT by ClanDireWolf]
I'm thinking seriously of buying a foreclosed home in Tennessee.

I'm going down in a short time to do a inspection of the home and property.

What should I expect with dealing with the bank? Will it take months to close a deal with them?

Can I get them to take less than their selling price? The home has been on the market for less than a year and they built a new prison less than 15 miles away.

So, any advice?
Link Posted: 2/24/2013 8:11:10 AM EDT
[Last Edit: 2/24/2013 8:17:31 AM EDT by ScubaSteve86]
I bought a foreclosure. It really is no big deal, in my opinion. Just remember, they are not going to do any repairs, and the property hasn't been kept since probably before the previous homeowners were evicted from the place. The one thing that got me in my deal, was the fact that I made an offer $5k below asking, they accepted, and somehow a week later they decided that that was no longer acceptable and wanted the full asking price. I thought this was a breach of contract, but apparently they were able to get away with it due to some loophole, according to my agent So basically, be patient and willing to shell out the money to fix stuff.
Link Posted: 2/24/2013 8:15:46 AM EDT
Expect it to be thoroughly trashed.
Link Posted: 2/24/2013 8:23:08 AM EDT
I have done foreclosure some were shit and some were fantastic. Just get the right price and have a structural engineer with a background in home inspections look over it. Then a plumber and an electrician. Spend a little to avoid spending a lot.
Link Posted: 2/24/2013 8:33:22 AM EDT
Originally Posted By Frank_The_Tank:
Expect it to be thoroughly trashed.

And used as a meth lab.
Link Posted: 2/24/2013 8:38:42 AM EDT
[Last Edit: 2/24/2013 8:40:25 AM EDT by geekz0r]
Originally Posted By Frank_The_Tank:
Expect it to be thoroughly trashed.

Especially any copper fittings. Even if the homeowners didn't trash the place in revenge - and steal all fixtures worth any $$$ there's also the possibility that there's been squatters & vandals too.

Don't just inspect it yourself - have it inspected by an expert.

And if it's a "short sell" be prepared for the possibility that it might be cheaper to bulldoze it down and build new.

and meth lab. ugh. good point. might want to research the address with the police (or online at least) to see if there's any reported issues.
Link Posted: 2/24/2013 8:45:10 AM EDT
Clear title. No liens. If it's a short sale, make sure you don't get stuck assuming the Banks short sale loss. It happens. I would have an Attorney look over the final papers before signing them.
Link Posted: 2/24/2013 8:46:31 AM EDT
When you present your offer, include a document from your lender stating that you qualify for the loan. There's nothing that pisses off a seller more than a buyer who can't afford to buy!

If you don't have someone knowledgable about real estate contracts, get an attorney to help you write your offer.
Make sure early on, to ask the seller what type of deed he is offering at closing. There is more than one type of instrument to convey property. In Mississippi it can be done with a General Warranty Deed (the best type), or a Special Warranty Deed (2nd best), or A Quit Claim Deed (NEVER USE ONE OF THESE!).
If there are covenants, get a copy and READ EVERY WORD YOURSELF!!.
Check witht the county and see if they have countywide zoning and find out EXACTLY what type of zoning is around the property! VERY IMPORTANT !!
Try to negotiate the seller to pay all of the closing costs.
Make sure all tax prorations are done at closing.
Make sure you get a BUYERS / OWNERS title insurance policy. Don't confuse this with a lenders title insurance policy.
Make sure the property is surveyed prior to closing. Select a registered surveyor and do this yourself.
In your contract, ask for a CONTINGENT 14 day inspection period in which to do all of these things (Inspection, survey, etc.) AFTER YOU HAVE AGREED ON A PRICE.
If its on a septic tank, or treatment plant, get it inspected.
Be aware that hot water heaters, A/C systems, faucets, toilets and most mechanical components have a useful life of around 10 years.
Always assume a "surprise" that will show up later. Have some extra cash on hand for the surprise!!! I promise there will be at least one !
Talk to the neighbors. Find out about the previous owners.
Find out if any illegal activities occured on the property. Meth lab, murders.

Remember, DO YOUR DUE DILIGENCE! You may have to sell this property one day. Be careful there is nothing wrong that would come back to haunt you later on......

Good Luck !!
Link Posted: 2/24/2013 9:00:23 AM EDT
Thanks guys for the advice.

And for suggesting about finding if it was a meth lab! Never entered my mind.

1962guy, Will do! Not my first home by any means but thanks for the solid advice.
Link Posted: 2/24/2013 9:00:49 AM EDT
Another thread of "I don't know what to look for".

Ok, OP, let's go back to basics.

Historically, most homes are fixed up for sale. Things like plumbing and painting are done by the seller. Why? Because instead of you coming in with extra cash for repairs, the cost of repairs is built into the sales price.

So, if you have carpentry, electrical, plumbing, roofing, drywall, tile laying, and painting skills, you can consider a fixer-upper. A foreclosed home is a fixer-upper because the usual repairs done before sale will not be done.

In most states, the seller has to disclose the known and hidden defects in the property. When a bank has foreclosed, it has not personal knowledge of hidden defects.

This shouldn't be a problem if you PAY a LICENSED CONTRACTOR, and not an inspection service to accompany you to inspect the home. Your laborer brother-in-law, the home inspection service (with the nearly non-existent warranty), and your agent (who wants to make a sale and collect a commission) do not qualify as a licensed contractor.

So far, nothing that I have written should come as a surprise. If it doesn't, then you need to find a broker who will educate you.

The real questions are: 1. can bankers be asshats;, 2. will there be delays beyond a normal sale; 3. will the banks be eager to dump property?

1. bankers can be asshats, just like other people.
2. yes, there will be delays unless you come in with all cash;
3. no, the banks are not eager to dump. Why? Because, selling means taking losses on the books. It means loaning less in the future and having to put up more cash reserves under the federal insurance programs for accounts. The banks had the government change the valuation of homes on their books to current value from historical value until the market tanked. Now, the banks are back on the historical acquisition costs. The problem is that virtually every loan made since about 2004 will reflect a loss on the original loan, particularly if there is a foreclosure.

So now, the repetitive question of "I don't know anything, but I want to buy a foreclosure" is answered.

I had a client who had a terrible real property problem. He decided to buy a fixer upper and save money. Of course, he had no background in construction or any trades. Disaster, of course. Or the dress salesman who lived across the street from my dad was planning on retiring and building his own retirement home. No background, aging, wife in poor health, but by God he was going to get a retirement home wholesale. Disaster.

Do you know why real estate agents don't like dealing with foreclosed properties? Because they want to earn a commission.

My girlfriend's son is in the business of buying, fixing up and re-selling foreclosed properties. He has crews of people with whom he works. He also has the sources of funds for the effort so that he doesn't have to gone through the arduous task of applying for a loan to buy a foreclosure. You cannot duplicate that.
Link Posted: 2/24/2013 11:15:36 AM EDT
Concrete in the sewer line.
Link Posted: 2/24/2013 11:36:38 AM EDT
We bought a foreclosure. The only thing that was out of the ordinary was the incredibly long time it took to complete the sale. The bank really drug their feet on absolutely everything.

The rest of the advice in this thread is standard fare for buying a house, foreclosure or otherwise. Get a home inspection by a competent, licensed, bonded inspector. Make sure you get thorough documentation for the inspector, and ask to see a sample of his documentation. We received a binder with hundreds of notes, pictures, and other bits of information on every imaginable piece of the house. The plumbing, electrical, foundation, furnace, roofing, siding, and even fencing was all covered in detail. That will give you a good idea about whether or not the house is a good purchase based on the amount of money you're going to need to invest to get it up to your standards and keep it there.

I would also recommend getting any optional services offered during the purchase. We paid extra to have the inspector perform a Radon test. Our house came up clean, but the extra peace of mind is well worth the $60 we paid for the test.

We were broke young newlyweds when we bought our house, so we didn't opt for the land survey during the purchase process. I still kick myself regularly for that and we're going to have to pay for the survey anyway before we replace some fencing on our property.

Finally, as with any house purchase, keep in mind that buying a house is expensive. I'm not talking about the purchase price of the house, but all of the other stuff that is involved when buying. This was our first house, so we weren't fully prepared for the closing costs. Keep in mind that you'll be paying for things like title insurance, taxes, closing fees, insurance binder fees, home inspection costs, radon testing, property surveys, moving costs, and all of the "stuff" you need to buy to put into the house if you don't own them already (e.g. appliances, furniture, cleaning supplies, paint, etc).
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