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Found a foreclosed house,now what?

C

Cherokeekid88

NAXJA Forum User
Location
North Carolina
Found a house that the fiancé and I like. It is a foreclosed home and just wanted to know what the next step would be. I know that we might need a per qualification letter before they will let us see the inside,not sure. It is banked owned and didn't know if I needed to contact them first or if the realtor we get does all that. We would be first time home buyers and not not experienced at all in the foreclosure/home buying business. Any advice/tips would be greatly appreciated.
 
Take an inspector, a friend of mine used to deal with rehab and sales of foreclosures and there were plenty that needed work, some to the point they probably should have torn it down and started fresh. Even the bank would get in the way of selling the houses they wanted/needed sold. One refused to sell a house for what they were asking, even though the purchasers were happy to pay the price.
 
We bought a foreclosed home as our first home. Got a $140k house for $70k can't beat that. I agree with the inspector statement. In our case he didn't find anything that I wasn't able to fix myself luckily. We got a real estate agent because she was a family friend and she handled all of the bank contacting because ours was bank owned as well. In the end the agent didn't really cost us anything because we got the deal worked out where all closing costs were paid by the bank. It was worth it to me because I trusted the agent and knew she had our best interests at heart and made sure we got a great deal.
 
We have a realtor that we have talked to and she is just waiting on us to let her know when to get the ball rolling. I think we are about ready and just so happened to find this house that we both like (from the outside and its location) and are wanting to see the inside but wanted a little more info on dealing with a foreclosure. I know we would more than likely need a pre-qualification letter in order to even see the inside. But I was just talking to my boss and he was telling me that they really don't do 100% financing anymore, that its 97.5% now. I was hoping for us being a 1st tiem home buyers, that we could get away with just paying the PMI and not having to put anything down so that we could buy anything the house needs that we don't have.
 
Im going thru the same process, heres what I know...

You will need a loan regardless.. So best thing to do is get in touch with a lender to get pre-qualified so you know how much you can afford, they can also go thru which loan is right for you.
I just got qualified for a FHA loan and it still requires 3.5 percent down and you will still have closing costs also with an FHA you have to carry mortgage insurance.
You can also look into homepath financing but I have read they are hard to get loans and may not be the best option.


Either way I think you would want to do this:

1) Get with a lender and get prequalified so you know how much you can really afford and what the terms would be.

2) Look at the house first before bringing an inspector, you may hate it before needing to go any further or find obvious problems. Inspectors will range from 200-600 dollars. (Of course if you have a friend/ relative to come along that knows about building code/ construction thats good to)

3) If you do think you like the place, then you put an offer in contingent on passing an inspection. So if it passes your good to go, if not then all your out is the inspection cost.


Also not knowing your background it can also be very helpful to read up on common "problem/ issues" to look for when looking at houses before paying for an inspection like, aluminum wiring, roof condition, etc.
 
Well I have a guy I work with who is best friends with an inspector, so he already said he would inspect it for me. putting down the 3.5% is gonna be a bummer. I didn't realize that they rules had changed about 3 years ago, because My fiance's brother got his house with no money down.
We had set money aside for other things that we knew we would need coming from an apartment to a house....I just wonder how much wiggle room is in the asking price from the bank on a forclosure.
Also, are pre qualifications good for 30 days or 90 days?
 
Get them to allow you to view the property. If you like it you can pursue it further, no sense jumping through hoops if its not what you want inside. I don't believe you CAN get a loan without a home inspection anymore as the lender will usually require it. But that can come a little later in the process.
Sit down with whoever you lender will be, your bank or CU or whoever and discuss options.
A couple things to note... despite what the politicians and media allude to, the housing market is still a big mess. It is also still a "buyers market" and with the number of foreclosures the banks are currently stuck with, the advantage should be yours. They helped feed the inflated values of the market and then got stuck with a bunch of property. Many still think people don't understand this and will try and eek a profit out of the house even though it is something they really need to off load. Some will work willingly, some want to play hard ball.
Also, you'll want to know how long the house has been unoccupied as things seem to just go wrong/bad being left alone.
Lastly... I know its hard but try if at all humanly possible to avoid a 30 mortgage! Go with a 15 year... trust me on that.
 
Thanks alot for the advice guys. I am trying to go into this knowledgeable and smart. I am emailing a couple lenders that are personal friends to friends of mine and just getting everything I need in order to go through with the pre qualification. I have a guy that will do a favor to me and do the inspection for $100 and will sign off on it.
Yeah, I think I am going to contact the bank that owns it and ask them what I need to do to view the inside...maybe they are wanting to get rid of it quick....I think its only been sitting for a couple of months.
 
If it's only been sitting for a couple months, that's probably good. Hasn't been empty long enough to have issues from that and hopefully the meth/coke heads and scrappers haven't started gutting it yet!
 
Just saw this and thought I would put in my .02. I went through this process as a buyer approx. 10 years ago now, and the real estate agent I dealt with hated every minute of it because he was only making 2% on the sale, while the selling realtor was making 5%. I never even met the selling realtor, and they weren't even present at closing. Apparently this is common, as I have heard the same from other realtor friends of mine. So don't be surprised if your realtor isn't real supportive or responsive of you buying a foreclosed house.

Also, make sure the power is on in the house, especially this time of year. It takes a very short time for pipes to freeze and burst when things are powered back up. Look it over VERY carefully when you do get inside the house. Do some research on previous owners and such too. Be there to look at the house WITH the home inspector. They may see things "in passing" that don't make it on their report.
 
Not sure how much the friend of mine that was on the sales side made, but from what he was describing, 5% would have been a slap in the face. It was enough stress and all out aggrevation that he handed over his realitor license and came back to working regular retail earlier this year!
 
The key problem with foreclosures is that it can be and often is a lengthy process. Some take longer than 6 months, but it may be worth it if you're not in a hurry. Some foreclosures are in pretty good shape, so you might get lucky.

Get a realtor to work on your behalf. Realtor fees are based on the selling price and are paid by the seller. As it was already mentioned, it's a buyer's market. This gives you a favorable position for negotiating price. Make sure your realtor pulls comps in that area. Also ask how long the house has been for sale. The longer it's been on the market the more you can take off the asking price. Everything is negotiable.

Makes little sense to hire a home inspector before you've had a chance to view the home yourself. You may find the house in such bad condition that you won't even consider making an offer. Now you just saved yourself some money. If you find the house looks great, then hire the inspector and attend the inspection. Even though the inspector will (should) compile a detailed report, take notes anyway and figure up the cost of needed repairs. Try not to get bogged down in the little things. You want to focus on areas of significance, such as foundation, roof, leaks (mold), termites, water run-off (slope), etc. If the house has "good bones," you can take care of the little things like drywall repair, painting, fixtures, etc. Deduct the big & small repair costs from the asking price. Remember: Everything is negotiable.

Generally, nearly all loans require a down payment. This is not the result of some rule change three years ago. VA loans are the exception. Are you a veteran? If so, go VA. What's changed recently is that lending institutions have made it more difficult for some people to qualify. It may be necessary for you to save your money for a down payment and then go house shopping. Also check with the city to see if they have any first-time home buyers programs or other incentive programs. Many do.

Funny how I saved this for last: First thing you should do is get with a loan officer to determine how much you can afford. Otherwise, you're wasting your time and everyone else's. If the lender says you can afford up $180K, be aware that it's not a good idea to get that much. It's very risky max'ing out your budget and just plain sucks to be "house poor." A good rule of thumb is to never exceed 35% of your take-home pay for your house payment.
 
Yeah, I talked with a lady yesterday that was recommended to me by a co worker. She was telling me about something called a chip loan that has an even lower down payment than an FHA loan. I don't really have an issue with putting down a down payment, was just hoping that our credit would be good enough to get 100% financing, but it seems those are indeed few and far between. We pretty much have everything we need lined up, now we are just shooting for a day to start... I think we are gonna try to start after we get out income taxes back.
So, we'll see I guess.
 
OMG! Sooooo much misinformation in this thread!! I'm sorry guys, I know you all mean well, but jeeeeeebus!! Where do I start?!?

+ Markets change! From year to year and from location to location! Get a Realtor that knows your area and is willing to help you through this! The seller is paying for your agent and you will NOT save money by trying to buy without representation! That will just lead to the sellers agent making double. If your agent doesn't want to work for 2%, then find another agent.

+ Get prequalified. You don't want to waste your time or anybody elses if you can't buy right now and you certainly don't want to get your lady's hopes up if it's not an option. Typically, you need 3.5% down (FHA). Fannie Mae (HomePath) and Freddie Mac (HomeSteps) homes can be as little as 3%, but that goes with the home (these are Federally insured foreclosures). Are you a Vet by any chance? VA loans require no down payment and no PMI. Other than that, some communities or some rural areas have 100% financing through USDA loans or grants; a good Realtor and a good loan officer is going to be able to tell you about that.

+ Yes, it's a buyer's market, but it's a weird one and it is NOT the same all over the country! Around here, sellers are losing their shirts and prices are in the toilet, but homes are selling 48 hours after being listed (at the right price, of course)! Unless my client is looking for something very unusual or unique, I won't even show a house that's been on the market for more than 10 days... and that's pushin' it!

+ Around here, the three big banks require a prequal from their institution in order to submit an offer on one of their foreclosures, so I encourage my clients to get a prequal from Wells Fargo, Bank of America, and Chase before they start looking. We don't want to find the perfect house and then miss out while we're waiting on a letter. If you really want to shop around for the best deal on a loan, I would ALSO get a good faith estimate from a credit union and a mortgage broker. If you do all this within a matter of weeks, your credit score won't be negatively effected by having multiple inquiries - you're no longer penalized for shopping around like you used to be, but you've got to work fairly fast (3 weeks). You can also get a copy of your credit report from the first lender and provide it to subsequent lenders with the understanding that they will have to re-pull credit before a full approval is issued (this would probably have to happen anyway).

+ Foreclosures don't take a long time, short sales do. A foreclosure should close escrow (ie. the process is complete, here are your keys, congratulations) as fast as your loan officer can process the loan (45 days usually).

+ With short sales, it's not uncommon to wait 90 days just to get bank approval - then you've got to wait another 45-60 days to close the deal. I've had some deals take 6 months for bank approval! Or longer! The fastest short sale I've done was just 6 days to bank approval, but that's super rare. Around here, only about half of short sales ever close escrow, and that's a significant improvement from a couple years ago! IMO, they're still worth all the time and hassle unless you're in a real time constraint or you or your lady get real attached easily and are going to end up heart broken. The important thing is, if you're going to submit an offer on a short sale, don't stop looking until you get bank approval! Ask your agent up front if they're going to be willing to do that. You can have multiple offers out there, anything less is putting all your eggs in one basket. (That's with short sales only, while you're waiting for bank approval since such a low percentage actually receive it).

Sorry I can't go over more with you, hopefully that helps! If you (or anybody else) have any other specific questions, feel free to drop me a line (I may forget to check back in here)... just mention you're from NAXJA!

Billy <at> RedCedarRealty <dot> com

Oh, in case you're wondering, I've been in the business for about 8 years now, many of which were in new home sales. I've closed over 100 escrows. Now I operate my own independent brokerage.

Good luck man! It's a great time to buy!
Billy
 
if you get an 3.5% FHA loan you have an additional upfront insurance cost, was going to cost me 3k, i just put that towards the down payment and avoided the cost and lowered my pmi considerably
also with forclosures make sure there are no unpaid taxes or leins on the house that will be on you to pay
 
I was never required to have a prequalification letter to see the inside of a house, just to make offers obviously.

If you aren't 150% sure of your abilities as a handyman you NEED a home inspector to take a look for you. I was fairly sure of myself, and still missed stuff - honestly it was such hidden damage I doubt even a pro would have noticed it (sill plate rotted out with siding over one side, a wall on top of it, and new lumber attached to the inside. Literally no way to see it.)

MAKE SURE you have a good real estate lawyer representing *you*, don't just use the bank's. My bank's lawyer completely missed some glaring title issues that my lawyer found, resulting in me checking a certain box on the forms that required them to deliver insurable (at the very least) title to the property, which torpedoed the sale as the title was completely screwed up by a sloppy mortgage agent who did the mortgage that was foreclosed on. A few months later I had scraped together the cash to buy it outright and they had cleared the title enough for title insurance, so I ended up going with the same real estate lawyer and not getting a loan at all.

edit: a few more things
- if it's a short sale, ESPECIALLY a bank of america one, don't even waste your time. Walk away. I wasted many months of my life on a BoA short sale and they basically offered the deal in bad faith. I offered them $100 over their asking price, which was probably more than the place was worth, it was almost a tear-down property, and they just kept jerking me around with extensions instead of actually doing anything. After around 6-8 months I finally gave up and said guys, my lease is coming due for renewal and I'm not renewing it. Piss or get off the pot, this is ridiculous. They kicked my deposit back and from what the selling agent said, hadn't even looked at the offer yet.
- check if the home has a HOA, etc. Make sure you're ok with the HOA rules and regulations as they currently stand if it is. As a military vehicle, jeep, and ham radio enthusiast, there is absolutely no way I'd fit in well in a HOA neighborhood, so I didn't even bother.
 
Last edited:
kastein said:
I was never required to have a prequalification letter to see the inside of a house, just to make offers obviously.

If you aren't 150% sure of your abilities as a handyman you NEED a home inspector to take a look for you. I was fairly sure of myself, and still missed stuff - honestly it was such hidden damage I doubt even a pro would have noticed it (sill plate rotted out with siding over one side, a wall on top of it, and new lumber attached to the inside. Literally no way to see it.)

MAKE SURE you have a good real estate lawyer representing *you*, don't just use the bank's. My bank's lawyer completely missed some glaring title issues that my lawyer found, resulting in me checking a certain box on the forms that required them to deliver insurable (at the very least) title to the property, which torpedoed the sale as the title was completely screwed up by a sloppy mortgage agent who did the mortgage that was foreclosed on. A few months later I had scraped together the cash to buy it outright and they had cleared the title enough for title insurance, so I ended up going with the same real estate lawyer and not getting a loan at all.

edit: a few more things
- if it's a short sale, ESPECIALLY a bank of america one, don't even waste your time. Walk away. I wasted many months of my life on a BoA short sale and they basically offered the deal in bad faith. I offered them $100 over their asking price, which was probably more than the place was worth, it was almost a tear-down property, and they just kept jerking me around with extensions instead of actually doing anything. After around 6-8 months I finally gave up and said guys, my lease is coming due for renewal and I'm not renewing it. Piss or get off the pot, this is ridiculous. They kicked my deposit back and from what the selling agent said, hadn't even looked at the offer yet.
- check if the home has a HOA, etc. Make sure you're ok with the HOA rules and regulations as they currently stand if it is. As a military vehicle, jeep, and ham radio enthusiast, there is absolutely no way I'd fit in well in a HOA neighborhood, so I didn't even bother.
Click to expand...
my house was a short sale and i closed in a little more than a month IIRC.
 
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