Too good to be true ? A $140K+ house is up for $79K

[KurtNYC]

I have never bought a house before let alone a foreclosure but I have been watching for 2 years and have missed a couple good opportunities. There is 3 bed 2 bath house, gas heat, deep lot, working fireplace for sale. It last sold for $194K during the bubble in 2006. It is now foreclosed and owned by Fannie Mae. They are asking $79K. The only downside I see is that there is no driveway. There is a barn/garage but no driveway. Fortunately we are in a walkable small city but if it had a parking it would be a slam dunk.

It is torturing me because on the face of it it seems like a screaming "buy" but I have just never been through the process before and have no idea what kind of risk I am taking on this. I talked to the prior owner, who sold it to the person who defaulted, and she said it is/was a solid house when she owned it briefly. She bought it for $77 and sold at $194 only 16 months later.

Anything I should know or look for on a deal like this? Any thoughts or help appreciated.

[Sherman A1]

1. Have the place inspected

to start and be very, very careful.

[vankuria]

9. When you have it inspected

make sure you are using a reliable inspection service and not one your realtor suggests. Ask friends, relatives, or where you work, for suggestions on inspection services. This is the first start in your process to ensure the home is sound. Also, make sure the house is not in any flood zones.

Good luck, I hope this is a good deal for you!

[kiva]

41. So this,

says the person who just had to have 15 feet of cement block wall replaced

[Renew Deal]

2. Is it in the NY area?

Was it flooded in a hurricane? Are there other people living in the neighborhood? The neighborhood may be abandoned or partially abandoned. Are there sex offenders near by? Has it been inspected (asbestos, mold, etc)? And there are a million other issues and questions.

Was it previously a meth lab? http://www.justice.gov/dea/clan-lab/clan-lab.shtml

Is it near Fukushima, Japan?

[JimDandy]

44. Is it near Fukushima, Japan?

[graham4anything]

3. If the house is for sale at 79k, it is irrelevant any other price, higher or lower.

Other numbers matter little.

If you buy for 79 and in 25 years sell at 100, you make 21
You never need to get what something MIGHT have been worth at some other point
As a numbers person, people make that mistake all the time.

Something is only worth something on the day its sold.

What it is in in the period from purchase to sale matters zero.


note-I am assuming it is in the NY area as the OP has NY in their name. My bad if the property is not in the north east.

[Renew Deal]

4. Numbers matter

For instance, it may be worth almost 50% less for a reason.

[graham4anything]

7. But then it's not worth $158 so it is worth $79

I take it as a given anyone looking at a home to buy would hire an INDEPENDENT person to go over every inch of the house
(one not associated with any part of the deal itself).

But then, that's a given, no one does NOT get an inspector/inspection in NY and NJ. It's the law.
(and one should hire a lawyer too and look over the history of the home.
But again, that's a given I would assume.

But it is 100% irrelevant what price something was in 1996.

I bought my house at 160 and it might have been worth 600 at some point with the work we did
If I get 400 now, that is 240 more than 160 so I would be happy.
Why would I expect 600?

When it was worth 600, It would have cost me 800 to buy what I bought for 160

[Renew Deal]

15. You wouldn't be concerned if it went down 33% over some period of time?

You wouldn't want to know the reason why? Is your point that you don't care what happens to it before or after you bought it? If that's the case, I've got some real estate to sell you.

[graham4anything]

17. Something is only worth what the price is, not what it should, could or would have been

Something is only worth what a buyer/seller will pay.
If there was a foreclosure, then the current owner who purchased it doesn't have the 1990 price so it's still a big profit if that person bought it for say 50 and now its 79

Again, I assume a buyer will hire a lawyer, and a QUALIFIED not biased inspector

So those questions of IF IF IF will all be answered prior to any sale.

If the house passes inspection, and is not on a flood zone (which one can easily tell (remember to talk to neighbors and more important do research at the local library and make some "phony" conversation-

like
Hey, we are moving here, glad to see you rebuilt so nicely after Hurricane Sandy, it must have been awful
and let the other person lead the way

Go to the library, the local post office and get some real conversation along with the inspection.

But if something was worth 600 and there is nothing illegal being attempted (does it say "needs work?&quot
then it sells for $100 and you put in some work, what is wrong with that?

It might just be a bargain, or it might not.

But it could be legit.
or it could be "if the price is too good to be true, then something is wrong".

But I believe the OP said something about a foreclosure, so indeed, the current owner might not need the 1990 price to make a great profit for themselves.

[KurtNYC]

24. Thanks. I think I get your point about worth being only relevant at the time of the sale

I have been on the phone with my real estate agent for the last hour and she pulled up everything she could on this. The condition is listed as "fair" with a disclosed heating/plumbing issue. Also the house has an offer on it and was under HUD restrictions for the first 15 days. We are going to try to get in and see it anyway and I am trying to line up someone qualified to estimate the repairs on the heating plumbing.

I am in the Hudson Valley these days (but have not changed my screen name here). No flooding or Sandy damage to this house but it has been closed up and winterized since it went into foreclosure about 2 years ago.

It is now on the regular market as a bank owned property (BofA) and they want it off their books ASAP.

[FreeJoe]

47. I don't necessarily agree

I agree that when you appraising something like a house, the only number that really matters is what it is selling for today. Once you own it, how much it is worth at any given point of time is still relevant even if you aren't planning to sell it. That's what your property taxes are based on (at least here in Texas). It is also an indicator of how much you can borrow against it. You also need to know its value to estimate your equity, which is an important thing to understand for your financial planning.

[TheMadMonk]

48. Lived rent free with the parents all your life have you?

The problem with real estate these days is that everyone looks at it as an investment, and entirely ignores the bloody obvious. It's purpose, first and foremost is to keep the occupants and the environment apart.

Its value is in the purpose it serves right now.

Its value is not in potential profit at some time in the future. And your idea that something has no value except at the moment of sale, goes a bloody long way to explaining the problem that is a America today.

[KurtNYC]

61. I took his point to be very similar to yours -- a house is for living in

so once you commit to buy, just plan on living there for 10 years or so and forget what it may or may not sell for.

[haele]

5. If you're going to look, take a contractor that specializes in house repairs with you.

It probably needs some work.
Problems to look for Asbestos and/or lead (paint, ducting, insulation), termites/infestation, faulty wiring or plumbing, a gas leak, broken fireplace, failing foundations, a previous horder/illegal substance situation where the drywall and flooring is affected, leaks flood damage, it needs a new roof or furnace/HVAC replacement...any number of things.

Also check with the city before you agree to anything; there also might need to be some abaitment done due to code violations (that third bedroom or second bathroom may have been built on or had been a garage conversion without a permit).

Haele

[ohheckyeah]

6. Look it up on Zillow....

you can get aerial photos and other information that might help you in the decision process.

Get it inspected. That's an absolute must.

[Scuba]

8. The first three rules are ...

Location, location and location. Remember, you can change everything but the location by just adding money (forget about having it moved). Get bids on a driveway if that's important to you.

I endorse the comment above about having it inspected. Find a qualified inspector and have him/her give it a thorough going-over.

Finally, if Fannie is asking $79K, start the bidding in the low $50's. You very well may be able to get it for $65 or even lower.

On edit, pay close attention to furnace, A/C, water heater, water softener and other appliances. Also the kitchen and baths, as they are the most expensive upgrades.

[ScreamingMeemie]

12. Licensed real estate appraiser here, checking in...Fannie Mae typically doesn't negotiate.

It is what it is.

[Scuba]

19. Thanks, I had assumed they would behave like a bank.

May I ask what area you cover? I'm in the market for a house.

[ScreamingMeemie]

21. My area in Michigan was the Wayne/Macomb/Oakland area.

Here in Houston, I'm currently battling the state over not having to repeat the whole educational mess again because the states are not reciprocal. However, I've gotten really familiar with the area, and run desktop appraisals in the North Harris County Spring/Cy-Fair area a lot, so I don't get rusty when they finally give me my license.

Let me know if I can help.

[Scuba]

32. Hah! I fell for the Packer logo and leaped to the conclusion that you were in Wisconsin!

Glad to talk with another Packer fan anyway.

[ScreamingMeemie]

33. Born in Milwaukee, lived in Greendale and Grafton (my whole family lives there)

Moved to Michigan, met and married my husband, and then moved here with my youngest. You can take the girl away from the Packers, but you can't take the Packers away from the girl.

I have a good feeling about this season.

[Scuba]

36. "I have a good feeling about this season." Spoken like a faithful Packer fan.

[Honeycombe8]

42. I'm deciding whether to move to Houston area for my semi-retirement.

I'm from La & live in Dallas. I'd like to move further south, where the grass is emerald green St Augustine, and it rains a lot, and you can stick a shovel in the soil. And a short drive to see family in La.

Don't know if I'll make the move, since I'm dug in here in Dallas. But I'm mulling it over. I'm jealous of you living there already! Dallas is great, and Houston has problems, but for someone who wants to garden and is homesick for a humid, rainy locale near water...

[ScreamingMeemie]

55. I love it here. If you ever decide to make the move, come for a

visit while you're looking at places. I always have guest rooms for DUers.

[Honeycombe8]

57. I would never impose, but a visit wouldn't be out of line!

And since I'd be buying a house, maybe you could recommend a realtor, since you're in the business. And recommend some areas NOT to buy a house in (although I lived there for a few months years ago, so I know a tiny bit about Houston.)

Thanks!

[FreeJoe]

46. Welcome to Houston

I live on the north side of town. Enjoy the boom times while they last. I went through this in the 70s and early 80s. Everything was going great here and then suddenly it wasn't.

[ScreamingMeemie]

56. Thank Joe. I am on the north side as well. Luckily, I'm not here hinging on the boom.

My husband invested soundly so that I'm able to own my home and be a stay-at-home mom until my son graduates in a couple of years. I came for the weather. Hopefully, the bottom won't drop out on that.

[mwdem]

20. You've got that right, Laura.

We bought in SoCal almost a year ago. It was a Fannie Mae forclosure, and there was no wiggle room. Also, it took a lot longer, and we had to deal with a lot of paperwork, and different companies. Hated to sell my home in Texas and buy a condo here, but it worked out in the end. I would never do it again. The hoops you have to jump through almost gave me a nervous breakdown!

[ScreamingMeemie]

22. It's excruciating at times.

Fannie Mae takes forever to process the tiniest bit of information. I would cringe when the orders came across the fax. I'm glad it worked out for you.

[mwdem]

23. I hope Texas is working out for you and your son....

We lived in the Dallas/Ft. Worth area for seven years, my husband lost his job and was hired by a company here. Too bad we never got to meet!

[KurtNYC]

25. That's what I have heard. The price is the price.

[ScreamingMeemie]

34. If it passes an inspection (with minimal work), and it's a good percentage below

comparable homes in the area, I'd go for it. Look up the records at the assessor's office (a lot of times they are online now), and look at the assessed value.

I beg to differ from upthread where someone said not to go with an inspector recommended by a real estate agent. Real estate agents and appraisers have to adhere to a code of ethics (or lose their license/face stiff penalties) so most will have excellent inspectors to refer you to.

Contracters in the area also often work on the side as inspectors. Ask around.


I can't remember one time where I had a house that Fannie Mae accepted a lower offer on. When it gets to Fannie Mae, it's the end of the line.


Good luck!

[loli phabay]

10. might not be to good to be true, i just made a ridiculous offer to thebank that owned

The property in front of mine, they have held it for five years and have rented it out, they have been trying to move it for a hundred grand but i offered twenty and they accepted it. I never bothered with an inspection as its the land i wanted not the house, so for the wifes birthday i gave her the deeds and the demolition crew to take the house and garage down. Sometimes with foreclosures the banks just want it off their books so though there is risk you can get a deal, and sometimes improve your view as we have done.

[KurtNYC]

26. Congrats! and btw I am very good at saying ridiculous things, not always intentionally

[geek tragedy]

11. The obvious question is why no one else has snapped it up.

Would this be an investment or primary residence?

It also depends how much cash you would have to sink into it, how much it would take to get it up to your requirements/standards, etc.

Obviously, get an extensive inspection etc on it before making any kind of offer.

[KurtNYC]

27. That was my first thought also, My agent just told me that an offer was made on may 10

but since it is not yet final we can see it and make an offer also.

[madokie]

13. When you go for the loan borrow enough to put in a driveway

it won't make that much of a difference in your payment. Contact someone who you would want to do the driveway for you to find out how much it will cost and then included that cost in the loan you get.

[hedgehog]

30. Make sure you have street access for a driveway - that you aren't

up against some weird zoning issue.

[djean111]

14. The $79k might just be what is owed on it, or what Fannie Mae figures it will sell quickly for -

most banks do not want an actual house to maintain and pay taxes and insurance on, mow the yard, whatever.

[SoCalDem]

16. Foreclosures are often "listed" for ridiculously low prices

to encourage a bidding war..

If you can inspect it, do it.. and then submit what the MOST you are willing to pay is, and then keep your fingers crossed..

Flippers are usually paying all cash, so the terms are another thing.. If you cannot pay cash, you should have all your financing secured beforehand.

[Warpy]

18. Is it a short sale?

Typically that list price is just the rock bottom price the bank will accept and they will accept bids for 3 months or so. Bidding that rock bottom price is very chancy unless houses in your area are not moving at all.

Price what a blacktop or cement driveway would cost to put in and then tailor your bid to reflect that as an immediate expense.

Oh, and do find a way to get it inspected. Foreclosures can look OK on the outside but be completely trashed on the inside, wiring and plumbing pulled out of the walls for copper, and the whole place with water damage.

[MADem]

28. If you can afford to buy it, and can get financing if needed,

first thing I would do is check to make sure there are no structural issues--foundation, particularly, or mold, or a leaky roof, etc.

Get an inspector to do that and certify that the house is in good condition. Price for those guys vary according to where you are in the country but a few hundred is typical.

I would look at what houses are going for/valued at on that street and in that neighborhood--Trulia might be of help for this.

If the whole neighborhood has taken a price hit, then what you are seeing is nothing more than a course correction in the value of the property after a period of "irrational exuberance" (to quote whatserface's husband).

[ZRT2209]

52. good point - see if a lender would be willing to lend on it, and how much

[sfpcjock]

29. Banks will be more willing to lend to home buyers when the prices of the houses are not declining

...any more. The market may retrace its gains now and investors move into real estate. That's what it looks like to this beginner.

Make sure you do your due diligence on this house, as others have already commented and advised.

[notadmblnd]

31. Roof, foundation, plumbing

Those are the 3 major things that will suck money out of your pocket faster than you can earn it. Next would be mold especially if the house has been empty for a while, then furnace. If there has been any remodeling done, make sure no load bearing walls have been taken down. If all those mentioned are in good order, then make an offer. I would start at 68k and see if the bank counters.

[Glitterati]

35. That's a "come on" to investors

You'll never get it. Investors will gobble it up with an offer that includes a 10 day closing, cash deal.

The investor will offer considerably less than you, but the bank will grab the quick deal. It's priced under 100K for that specific reason - to attract the investor, 10 day, cash deals.

Don't get your hopes up.

Also, in about 45 days you'll see the same house, for less money on the market. That means it failed the inspection and even the investors won't touch it because it has structural issues. And, you shouldn't want it either unless you're willing to put north of $20K in repairs before it's livable. The odds are you can't get financing on it because it won't pass inspection.

Been there, done that, spent almost 2 years trying to find a home. I finally closed in February of this year - but on a home priced above the 100K and making a low ball offer on it. I won't tell you how many houses I looked at, put offers on, and got beat by investors because of the above.

[Glitterati]

37. BTW, the house was never WORTH $140K

that's what put so many underwater.

[KurtNYC]

62. They paid $194K and yes it was never worth that

and banks should never have lent that much on it.

[muriel_volestrangler]

38. It was bought for $77k in 2004 or 2005?

In that case, $79k now may be a realistic price. It's the $194k price in 2006 that sounds like the odd one out.

[ms.smiler]

39. I’ll offer even more for you to consider.

Do you have any idea if the property was lawfully foreclosed under state and federal law?

Do you have any idea if you’ll be able to obtain Title insurance which doesn’t list MERS, securitization and foreclosure fraud, (problem documents) as Exemptions or Exclusions in coverage?

Are you familiar with the recording laws of your state and have you checked the property Title and do you know how to spot invalid documents?

Are you at all familiar with securitized mortgages and their impact on property Titles?

Most likely there was a MERS mortgage filed. Later, an invalid Assignment of Mortgage from the loan originator to the mortgage servicer was filed after or perhaps even prior to the foreclosure action. If an investment Trust does appear in the Title history, was the Assignment filed within 90 days of the loan origination or likely years later after the Trust was closed?

After the foreclosure, the property was most likely titled over to Fannie, the actual owner of the loan at the time the property was foreclosed.

Do you have any idea if the original wet ink Note was produced in the foreclosure or was it supposedly “lost” and remains somewhere in the world today?

Do you intend to pay cash?

Here is the story of a property in West Charlotte that was foreclosed. A woman purchased the foreclosed property for cash. She later rented the home to a family. The family was recently evicted by the Sheriff because the property is being foreclosed, again.

http://www.wsoctv.com/news/news/local/family-says-they-were-erroneously-evicted-home/nXt2K/

As a homeowner, a business person, and someone who has researched mortgage/foreclosure/securities fraud for 4 years now and who has sued her mortgage servicer and is preparing another lawsuit, I suggest that you avoid foreclosed properties.

[Ilsa]

40. Don't forget to look at nearby

geology features. For example, is there a nearby creek that will cause land to shift and mess up your foundation in ten years?

Inspection is a must. Maybe even two.

Get multiple bids on the driveway. I've heard of as much as 100% variation in price in laying a new one.

I hope it works out for you.

[rdking647]

43. a 50% haircut in a forclosure isnt all that uncommon

the question is what are nearby comparable homes worth? what is it assesed at for tax purposes?

[KurtNYC]

63. It is assessed at $144

Houses to the left is $181 and $257, to the right $150.

[FreeJoe]

45. If it is selling for $79K, it isn't a $140K house

Houses are worth what they sell for on the open market. Unless you can easily change something about the market value of the house once you buy it, you are buying a $79K house, and not a $140K+ house. I'm not saying that it isn't a good value (I don't have enough information to say). I'm just saying that I wouldn't describe it as being worth almost double what it is actually selling for.

[MiniMe]

49. Make sure all the appliances are there

And the copper pipes and the wiring.

[Incitatus]

50. Consider the recent sale prices of similar homes in the surroundng area.

$79k is probably the fair market value now. You can't judge a homes value today by what it sold in the bubble. My home sold for over $300k in the bubble. I purchased it after a foreclosure for a lot less, and what I paid is about what I can sell it for now and about what other like homes in the area are worth.

[TlalocW]

51. Be sure to find out how many people were killed there

During the last owner's time there...

Just kidding (no, I'm not). No, seriously, don't do it (seriously, do it).

TlalocW

[Smarmie Doofus]

53. You can put in a ( gravel) driveway for about a grand.

Where is it? If you don't want it, I'll take it. Where is it?

[H2O Man]

54. That's how I bought

my house in upstate New York. I paid one-third of what the last owner had paid. It worked out well for me.

I have no special advice to offer. Just use your head to navigate the process.

Good luck!

[cliffordu]

58. If you are in a walkable city, get a bicycle, buy the property

and never look back.

Awesome.

[Bluenorthwest]

59. Making a driveway is not such a big deal.....

can do gravel for not much money. How fun, new driveway!

[flvegan]

60. Get a title search. GET A TITLE SEARCH!!

And one from a title company/agent that "gets" foreclosures in your state.

Good luck.