This blog is directed to a person or family who wants to buy a house to live in. This does not apply to investors who have cash, crews, connections, and experience.
If you are looking to buy a foreclosure, live there, and fix it up, it is a great idea if you can find the right house. A majority of foreclosures need a major amount of work, so you have to think about a few things.
- Any repairs you make will come out of your pocket, so you will need to have cash in the bank to make repairs, hire contractors, etc.
- Time….. Getting a house the way you want it can take a lot of time, a LOT of your free time is consumed in home repairs. There is always going to be maintenance in home ownership, but do you want to spend all your family and social time working on the house?
- Buying a foreclosure is difficult if you need to get a loan, most banks won’t lend you money for a house that needs a lot of work. A lot of banks won’t even look at an offer that has an FHA loan.
- If a foreclosed home has been on the market for more than 30 days, and hasn’t had a price drop, and investors haven’t grabbed it… it is not a good deal! There are probably major problems.
- If the house has foundation issues, that is very costly.
- Always remember this: It’s not just what you can see in the house, it is what you can’t see that can really add up in repairs.
The good news is you can usually have first crack at a foreclosure. There is a 10 day window when it hits the market that only owner occupied purchasers can bid on. This is to give the regular guy a chance, and not let the investors buy everything up.
My observations over the past few years:
Foreclosures usually drop the price $5,000 to $10,000 every 30 days, after 90 days they are more negotiable. They are not very negotiable in the first 30 days, and many times get above asking price.
Dealing with a bank is different than dealing with a seller (person), the bank is on their own time schedule.
Be prepared to walk away if inspections don’t go well. There is no renegotiating with the bank. You are buying the house as-is. I just learned this one the hard way J. You might hear otherwise, but 98% of the time they will NOT renegotiate for repairs.
I like to tell first time buyers that they may want to spend $20,000 to $30,000 more on a house and get something that is nicer. That is about $40 to $60 a month more. Instead of taking $1,000’s out of your pocket, and not knowing when it will end.
I have sold many foreclosed homes and have had happy clients. I just like to help people understand what they might be getting into. It is a big deal to buy a house!
What are your thoughts? Have any of you had a great experience or a bad experience with a foreclosure?