Would you buy a foreclosed home?

I would consider buying one, in fact we looked at a few - but just didn't find one that met our needs. However, we had the luxury of time - didn't have to be out of our existing place at any specified time. I understand that waiting for answers from banks can take weeks to months.

I expect to have to put work into any home we ended up buying - but the short sale/foreclosure ones always had special kinds of problems. We saw holes kicked in walls, renovations that got started with HELOCs but then abruptly stopped or finished with completely shoddy materials and work.

In the end we decided that we'd rather have older, yet maintained kitchens and baths than hastily half-done renovations that we had to dig into and "un-fix">

It is a risky proposition and I would not buy at auction. I bought a pre foreclosure about 3 years ago. I would consider buying another, as my situation has changed and I would like to trade up to a single family from my townhouse. I would remotely consider the foreclosure route but it would have to be a pretty special property at a special price. I would not want to buy a place where the house has sat vacant and had all the copper and other things ripped out by vandals, nor would I want a property where the previous "owners" destroyed the place as they left. I would be more apt to look at a short sale or something along that line. The banks have not set themselves up well to deal with processing the paperwork quickly so that is a reason to hesitate.

sure, why not? I didn't force or encourage anyone to make dumb financial decisions.

I would never buy a house until the foreclosure process was over, but that's a different issue. Its much easier, and often cheaper, to buy REO from a bank than the same property during foreclosure - why do it the hard way when you don't need to?

Usually in a foreclosure the bank will still bid the loan. I wouldn't want to own a property at the loan bid in this market - its almost certainly negative equity from the get go.

My wife and I just bought our first house through a short sale. It involved a mountain of paperwork and, since the seller's bank could have bailed at any time and proceeded with foreclosure, we did not feel confident that the house was ours until we got the keys at closing.

That said, our purchase price was 26% less than the sellers paid in 2005. The house was in very good condition since the sellers had an incentive not to trash the place and it never sat vacant. The house is big enough to meet our needs for at least 10 years, and the total monthly payments do not stretch our budget.

The short sale process was no picnic, but we wound up with a nice house at a fair price. If not for the housing downturn and foreclosure crisis, we'd still be priced out of the local market.

Two words. DO IT. My wife and i purchased a forclosed home back in November at more than 60,000 less than what its worth. Just like any home thats not new we had to do rugs, two new bathrooms, paint and love. I could not afford to buy a home in MA if it was not forclosed on. Andy LaFauci

I currently have a bid on a foreclosed home. This house needs some work but nothing to major. Keep in mind that every foreclosed home is different. We have seen some really nice homes to some homes that I wouldn't let my pets live in. There are also some nasty houses for sale that aren't foreclosed on.

high risk high reward

My wife and I found a foreclosed condo in decent condition that was built in 2006. We had hired a lawyer who did some research and found that the mortgage bank had placed the condo on auction, and then bidded at the auction (no other bidders?), and became owner of condo. A month later, the unit was listed for resale, 25% below auction bid and about 35% below original selling price in 2006. Great deal? Well, after the bank accepted our offer in April, here we are in mid-August, still waiting for the title issues to be cleared to move to closing. From placing the offer, obtaining the mortgage (which was reluctant to lend based on foreclosure history), and title issues -- this has been a very difficult process that may deter many except the most committed.

The consideration that would be foremost in my mind is that I was buying someone else's tragedy. Bad karma. I would not buy a foreclosed home.

make sure to spend $500 and get a decent lawyer who specializes in real estate

Rhea...
I understand the bad karma idea but.....................If everyone thought like you, there would be a lot of empty homes in your neighborhood in the near future. That is not good.
The forclosure purchase is for the patient buyer. They don't happen fast and cash speaks louder than mortgage approval. Most foreclosers are sold as is and need a lot of work. My kids just finally moved into one which required a lot of endurance and a lot more DIY attitude. But now they have their own home and paid a lot less the the previous two owners who were obiously lazy and deadbeats. So my kids have just made a major improvement to the neighborhood. Their new neighbor loves them for this reason alone.

Things are going to get much worse. Subprime mortgage resets peak this year. Prime mortgage resets peak in 2010. Alt A and Option Adjustable Rate mortgages resets peak in 2011.

Anyone who thinks real estate has bottomed or the credit crunch is over needs to wake up.

Hey, if I had $255K in cash lying around, I could probably afford a home as well. sheesh.

I'd have no trouble buying a foreclosed property - still depends on where it is. Just because half of Hendry street is turning over doesn't mean it's instantly a good neighborhood. The homes foreclosed could have been great people and the troublemakers are till there.

Rhea -
I can't feel bad for people who purchased these homes that were well above their needs and what they could afford. You can bring on your own bad karma by trying to portray yourself as something you are not - wealthy! Their bad karma also impacts their neighbors, who's homes are depreciating rapidly as their neigbhorhoods deteriorate, not to mention the responsible people who must pay to bailout these irresponsible 'Wanna-Be's.'

It is a risky proposition and I would not buy at auction. I bought a pre foreclosure about 3 years ago. I would consider buying another, as my situation has changed and I would like to trade up to a single family from my townhouse. I would remotely consider the foreclosure route but it would have to be a pretty special property at a special price. I would not want to buy a place where the house has sat vacant and had all the copper and other things ripped out by vandals, nor would I want a property where the previous "owners" destroyed the place as they left. I would be more apt to look at a short sale or something along that line. The banks have not set themselves up well to deal with processing the paperwork quickly so that is a reason to hesitate.

I don't see why anyone would rule out buying a foreclosed home - particularly if it is being sold at a discount to the rest of the market. Eliminating this option makes no sense. A previous owner who has had their home foreclosed on is certainly an unfortunate situation, but not buying the property on that basis isn't going to restore ownership to the prior owner.

I'd buy a foreclosed home if it represented an attractive buy relative to everything else on the market. Refusing to do so needlessly eliminates choices to no practical end.

Why do these blogs and articles simplify everything?? Only an idiot or utterly naive person would purchase a house without the ability to have it inspected first, or find out if there are liens against it. Buy a foreclosed home and get all the liens against it as well. Anyway, the foreclosed prices aren't that great.

The article said Henrique paid the entire amount in cash, I would like the IRS to chk his tax returns for the last 5 years.

I would however, they are usually very damaged and left behind in rotten condition. Usually the people are very upset that they have been evicted. With that said, they will put holes in walls, rip things out, leave things to break. Ie, one in my neighbor hood, where the movers broke a pipe (not sure how that would happen) but they let it run and there is now mold damage. Be cautious!

I currently have a bid on a foreclosed home. This house needs some work but nothing to major. Keep in mind that every foreclosed home is different. We have seen some really nice homes to some homes that I wouldn't let my pets live in. There are also some nasty houses for sale that aren't foreclosed on.

My wife and I have just placed a bid on a short sale. The current owner has a mortgage for $300k, we offered $240k. The owner accepted the offer, and now it's up to the bank. We've hired a lawyer and we've prepared ourselves for the long wait. A year ago we were resigned to renting indefinitely in order to be able to live in Boston, which was ok. The real estate downturn has made all the difference. We don't feel bad at all. The housing market was overinflated. Houses are supposed to be homes, not investments. The only people that should feel bad are the ones that have been involved in selling or facilitating predatory loans and those who were aggressively "flipping" properties.

why not??? A home is a home. If one is bought at a nice low price and a clean title, WHY THE HECK NOT?

Just to clarify....those who have been foreclosed on are not victims, they were / are irresponsible !!! You know you're gaming the system when you make $45K, have no money to put down and use "creative" financing to get around paying PMI on your $400k house. The banks who lent the money to these people are also paying the price for making irresponsible loans. When you play a game, you have to be prepared to lose. It is the responsible homeowners, who decided to live within their means, that are the real victims since they will continue to make payments on a house that's worth 20-30% less than it was 2 years ago without qualifying for a Government bailout (handout) funded by their tax dollars. Real Estate investors taking advantage of foreclosure properties is critical to stabilizing the housing market.

What is the best way to find forclosers or short sales in towns you are intrerested in?

The only difference between a house in foreclosure and any other is price. The seller is motivated and I can get a great price. It is a great time to buy. I don't feel bad for the people who bought too much house and got caught in a down market. Values go down. Live and learn.

I would but were would I even start looking at forclosed homes? Is there a free website?

It didn't say he paid cash it just said how much he paid and how much less it was then regular market price. You might want to re-read that before sending the IRS out on anyone!

Absolutely. That's how my wife and I purchased our current home almost 20 years ago. We purchased the home about 20% less than the going rate at the time. Otherwise, we could not have afforded to purchase the style of home in the town that we did. There is extra work & time involved in the process, but that's the cost of doing business.

I had posted earlier about buying a foreclosed condo that was 35% less than what the sellers paid 2 years ago. When doing my research, we quickly came to the conclusion the method of judging whether we got a good deal by comparing to what we were paying to what the original buyers paid was a false assumption.

Why? Because the original buyers bought at the peak (2006) of the housing market, the false assumption being, that if we bought now for 35% less, this would be a bargain (in 2006 this would be a bargain but we are in 2008) because the false assumption we made, and I'm sure by some other, is that eventually the market prices will correct back to 2006 levels. While prices may SOMEDAY go back to 2006 levels, in historic terms, the recent housing boom was fueled by easy lending standards which we may not see again.

The condo we were buying were all sold between 06-07, so the comparables were inflated 2006 prices. We came up with an additional measurement in. We took into account the town family median income and multiplied 3x to establish an affordability index. Then that index was used as a price barometer (the general theory that people should only pay 1/3 of their income on the mortgage) and then adjusted accordingly to the house/condo we were purchasing.

I am with Nancy, where do you begin the search?

The focus of this piece is on the psychic and qualitative aspects of bidding on a foreclosed house. It does not address the practical and legal risks involved. It really should mention that bidding at a foreclosure aution is risky business for the typical would-be homeowner who does not have professional experience in real estate.

First of all, the closing period following the auction is typically very short (30 days), which means that mortgage financing usually can't be used. The bidder needs to have 100% of the auction price in ready cash, even if only 10% is required as a deposit at auction. You may be able to line up financing in less than 30 days, but you can't count on it unless you have arranged it prior to the auction. As with any real estate contract, if you bid on a foreclosed property, post a deposit but fail to close, you will lose your deposit.

Second, various costs and risks are shifted to the high bidder by the foreclosing bank. Prior to attending the auction, you need to obtain from the foreclosing bank a copy of the purchase contract that you will be expected to sign as high bidder, and you should have that reviewed by an attorney before you bid.

Finally, you will have very limited (or no) access to the property prior to bidding, so making a proper inspection is difficult or impossible. In most non-foreclosure "as is" purchases, the purchaser can at least make adequate inspections and obtain professional engineering and environmental reports. In foreclosures, to be truly prudent, you would need to obtain these reports before the auction, which, of course, would be costly if it turned out that you were not the high bidder.

It is absolutely essential that anyone contemplating bidding on a foreclosed property do a little self-education and seek experienced legal help well before attending the auction.

I second Steve's and Nancy's comments. Is there a site where one one find listing of foreclosure sales in Boston? [It would have been nice if such information had accompanied the Globe article.]

I am with Nancy, where do you begin the search?

no. the vast majority of foreclosed properties and those in the pipeline are a result of loose lending that allowed owner occupieds to bid up sale price completely out of whack w/ income levels for the communities affected (ie brockton, lynn, parts of boston, etc). while most watch for their predictions about depreciation to come true in affluent suburbs the blood letting is currently in progress in these communities and no where near close to a resolve. the vast majority of reo's, especially in neighborhoods w/ a large number of similar properties, are foolishly risky at this juncture. a short sale in a more stable community is fine if you're the type of person that can tolerate the beaurocracy, are willing to repair and are willing to accept the risk of both the latent defects and the potential alt a, rate and inflation driven downward pressure on prices for the next couple of years. if you can get in on one in an affluent community and don't mind being the ugly sister jump right in. or you could always buy one of those tax foreclosure things i've seen on tv. you can pick up a $200k house for in the ballpark of $900 free and clear.

Be very careful at auction. There has been a rash of folks pouring cement powder down the drains. The drains work for a while when the new person comes in but then its big trouble and big dollars. Things are slow to bad here but they are a disaster in Florida and California.

I personally think real estate will be down or flat for at least 5 more years. If you are going to buy, look for an REO. Don’t worry about missing the bottom though.

"Wanna-Be's", "Lazy", "Deadbeat", "Stupid". I'm absolutely staggered by the negativity & hateful attitudes. Are any of you who are sitting in judgment aware that most of us in the middle class are only a paycheck or two away from homelessness ourselves? Have any of you made it your business to learn about the deceptive and predatory lending practices that many of these banks have engaged in?

I bought my condo in 2001. I paid LESS than what the bank preapproved me for because I knew that I would have a high interest rate and yes, it was a subprime "2/28" mortgage. I made a significant down payment (about 17%). I had a good-paying job that I had no reason to fear losing. I even had a cushion of several months' worth of mortgage payments in the bank. Two months after closing, I lost my job. I didn't go on unemployment. I worked 3 part-time jobs and continued to pay my mortgage for another 4 months out of my savings.

Unfortunately, when I finally got a full-time job, it was over $15,000 less than what I had been making when I bought the place. I could not refinance and I had no equity for a loan. Inevitably, I fell behind and very nearly lost my home.

I've been through bankruptcy court and loan modifications & am happy to say that my mortgage is now in good standing. (And by the way NOBODY "bailed" me out. I have legal fees, late fees, etc all tacked on to my mortgage.) I realize that I am blessed and am very grateful to have saved my home. I'm sorry that this post is so long but I felt it necessary to address some of the cynical, judgmental & hateful comments on here.

I would love to consider buying a forclosed home, but it always seems that you have to pay $400 for a forclosure list....

Can someone help me understand the processs better? how do I find out what houses are up for sale? what is the procude on bidding? etc.

If you dont know where to search for one, I probably would tell you don't buy one.
First rule- read the paper. That's the 'free search' then narrow it down by searching masslandrecords so you can find the house #. Then find the document that has the foreclosure info on it, i..e atty handling it etc. Then call them and find out when it's going to auction. Look up the bank that is foreclosing the property. You can call them from time to time and they'll cough up some info if you get the right person on the phone. (Countrywide is notoriously chatty if you get the right rep on the phone)

Usually once it's auction day, the homeowner (at least the ones I've paid attentention to) can find a way to get their house back, thus cancelling the auction or at least stall it. (Harvard, Westford, etc) Thanks everyone for giving imbeciles their home back, yet tightening lending standards on the people who are going about it the right way!

Most auctions you need like 5 or 10k from the start to enter and there is a set price -in the ballpark of the mortgage obviously.

Don't trust realtytrac- they have homes for 'foreclosure' listed that have been bought and sold the 'regular' way and then when you call them on it, they say whoops or they apologize, etc. Plus you only get it free for like 7 days and then it costs roughly $50 for wrong information, or information that they pull from masslandrecords.

In all honesty, it's kind of a pain. But if you can find a house that actually GOES to auction, and that the homeowner didn't completely ruin then go for it.

I bought a foreclosed home for over 100K than it sold for in '06. We hope the people that lost it are doing better now. We aren't happy they went through what they did go through, but we are happy that we came around when we did and were able to get a good deal on a home we love. We did have a horrible experience with a short sell before we found our home, but I won't complain about it. It was well worth the patience and hassle. We love our home, the neighborhood and the payment. If you are not in a hurry and have some patience to work with, give it a shot... You may very well end up with a decent home at a decent price. Good Luck!!

Just to clarify....those who have been foreclosed on are not victims, they were / are irresponsible !!! You know you're gaming the system when you make $45K, have no money to put down and use "creative" financing to get around paying PMI on your $400k house. The banks who lent the money to these people are also paying the price for making irresponsible loans. When you play a game, you have to be prepared to lose. It is the responsible homeowners, who decided to live within their means, that are the real victims since they will continue to make payments on a house that's worth 20-30% less than it was 2 years ago without qualifying for a Government bailout (handout) funded by their tax dollars. Real Estate investors taking advantage of foreclosure properties is critical to stabilizing the housing market.

Just to clarify....those who have been foreclosed on are not victims, they were / are irresponsible !!! You know you're gaming the system when you make $45K, have no money to put down and use "creative" financing to get around paying PMI on your $400k house. The banks who lent the money to these people are also paying the price for making irresponsible loans. When you play a game, you have to be prepared to lose. It is the responsible homeowners, who decided to live within their means, that are the real victims since they will continue to make payments on a house that's worth 20-30% less than it was 2 years ago without qualifying for a Government bailout (handout) funded by their tax dollars. Real Estate investors taking advantage of foreclosure properties is critical to stabilizing the housing market.

There are many properties for sale that might have similar bad karma "tragedies" that you don't know about - divorce, death, job loss, etc. I wouldn't rule out a foreclosed home on that basis. Every house has a story. As others have mentioned, be prepared to wait (even longer in my experience on a short-sale.) Just because it is a foreclosure, don't assume it's a great buy, and don't assume the best buys are always REO or pre-foreclosure homes. Sometimes the best values are being sold at a discount for other reasons. That said, my wife and I are purchasing a foreclosure home in our own neighborhood that is in disrepair. We plan to repair it so it's no longer an eyesore to the neighborhood, and then sell it at a reduced price to a lucky buyer. We're improving our neighborhood, helping somebody get into a home, and making a return on our investment.

I bid on an arts and crafts home in Milton in July, but the bank didn't get back to us before we had to go ahead and sign another lease so we weren't left without shelter at the end of August.

The place was trashed--not really due to homeowner rage, but rather neglect. A lot of attention was needed, and the heating system was at least 40+ years old. We pursued a construction loan, and having good credit was easily approved for more than we needed. Wells Fargo, our lender, was the owner of the home. Our broker attempted multiple times as did the branch manager to get in touch with the REO department with NO luck.

The selling agent handling the home was very skeezy and wouldn't say if there were multiple offers, and when he admitted there were other bidders, he wouldn't say if we were high or low or mid or give us ANY sort of feedback. Of course, we priced our offers (we raised ours to our max that we thought was worth our time and hassle and the cost of fixing the place up after a few days) also considering that the lender was making 10K-40K over what they purchased the place for at auction, not to mention the interest they would collect on a 30 year loan. Of course, the interest part is good for the bank but not for the selling agent, so if we fell short by 5 or 10K he probably wasn't going to point that out to a very inundated Wells Fargo since the sale price determines his commission.

All in all, I'd still bid on a foreclosure, but I'd plan for more time ideally. In this case, we were at the end of our housing search before signing a lease in the Lower Mills/Milton area so we didn't have more time to give, but now we have a lease with a 60 day out, we'll still be trying to consider more of these sales.

I did Realty Trac for one month and I don't find it to be a very handy tool. Foreclosures.com looks handy, but with a little more digging there are plenty of free resources too.

My understanding is that 95 percent of homes at auction are bought back by the bank holding the mortgage which, I guess, is necessary for the bank to get title. Then the vast majority are given to an agent to list on the MLS, where they are listed for less than the bank paid at auction.

I have been selling agent on three foreclosures and one short sail over the last three months, and I have toured many more foreclosures with my buyers. I think the best way to find forecloses is with a good agent who can find them in the mls for you, and represent you in the sometimes confusing, drawn-out buying process. I'd recommend a good lawyer as well.

We have been looking for a larger home and there are several foreclosures out there. The problem is that the homes are still assessed at the higher amount that they will not sell for. The taxes I am told "might" get lowered but would go back up. We might get a deal on the home but the taxes are insane and who knows what they would go to once the economy comes back. There must be something that can be done about this as I would think it would be an issue for many.