I need some real estate advice please

[georgiapeach]

Here's the deal. My neighbors were foreclosed on last summer, and the house has sat empty since then. They lowered the asking price about 3 months ago, and we saw maybe a total of half a dozen people look at the house. I talked to as many as I could, telling them how great the neighborhood is etc, because I really wanted someone to buy it so it wouldn't sit empty. The house is in need of some repairs though, and the bank wanted way too much for it in its current condition so no one bought it. I called a mortgage broker before they lowered the price and she said that it would be almost impossible to finance an investment property at that time and lending has gotten tighter since then. Now it is being auctioned off again, this time for back taxes.
If it is sold at a tax auction, it will be at least a year before the owner of the quitclaim deed can touch the property. I highly doubt the bank will redeem it during that time if they haven't bothered to pay the taxes now. My husband would like to try to buy it, but we have a limited amount of cash on hand to do so.
I'd like to see if the bank will sell it outright for a few grand if we agree to pay the backed taxes. Failing that, I might see if we can buy it at the tax auction.
Does anyone here have some idea how I should proceed with talking to the bank? I've never dealt with anything of this nature.
Thank you in advance!!

[danberkeley]

Here's the deal. My neighbors were foreclosed on last summer, and the house has sat empty since then. They lowered the asking price about 3 months ago, and we saw maybe a total of half a dozen people look at the house. I talked to as many as I could, telling them how great the neighborhood is etc, because I really wanted someone to buy it so it wouldn't sit empty. The house is in need of some repairs though, and the bank wanted way too much for it in its current condition so no one bought it. I called a mortgage broker before they lowered the price and she said that it would be almost impossible to finance an investment property at that time and lending has gotten tighter since then. Now it is being auctioned off again, this time for back taxes.
If it is sold at a tax auction, it will be at least a year before the owner of the quitclaim deed can touch the property. I highly doubt the bank will redeem it during that time if they haven't bothered to pay the taxes now. My husband would like to try to buy it, but we have a limited amount of cash on hand to do so.
I'd like to see if the bank will sell it outright for a few grand if we agree to pay the backed taxes. Failing that, I might see if we can buy it at the tax auction.
Does anyone here have some idea how I should proceed with talking to the bank? I've never dealt with anything of this nature.
Thank you in advance!!

The first question you should ask yourself is: am I buying the house to live in or as an investment? So if you are buying the house to live in, go ahead and buy it because you are not worried about whether or not the price of the house will go up. But if you are buying the house as an investment, you should pay no more than 50% to 80% the price at its peak or pay no more than its pre-2000s levels. Also, the rent should be more than your mortgage, else you are losing money every month. Lastly, housing prices may have bottomed out in nominal terms (it hasnt accodring to the latest stats), but if the housing bubble ever got reinflated (in nominal terms), then price of commodities would sky rocket (in nominal terms). So as an investment, dont buy a house unless it is dirt cheap.

[liberteebell]

georgiapeach,

I sent you a PM.

[Bruno]

The first question you should ask yourself is: am I buying the house to live in or as an investment? So if you are buying the house to live in, go ahead and buy it because you are not worried about whether or not the price of the house will go up. But if you are buying the house as an investment, you should pay no more than 50% to 80% the price at its peak or pay no more than its pre-2000s levels. Also, the rent should be more than your mortgage, else you are losing money every month. Lastly, housing prices may have bottomed out in nominal terms (it hasnt accodring to the latest stats), but if the housing bubble ever got reinflated (in nominal terms), then price of commodities would sky rocket (in nominal terms). So as an investment, dont buy a house unless it is dirt cheap.

Well said!

Also, OP consider how much extra cash you will need to complete renovations and pay overhead costs until it rents, including any mortgage you might have to get for it. The bank will not likely release their lean on a property worth tens of thousands of dollars for a few thousand dollars of their own. Its not worth it to them in most cases.

To find out what the bank or mortgage company would accept for the property before the auction, look them up on the assessor's website, or use a phone number if there is a sign in the yard. Call their 800# and ask for information regarding a foreclosed property at 123 Main st. or whatever. There will be a department or person who handles their REO's (real-estate-owned) properties and should be able to provide you a payoff figure. But if they have already scheudled an auction, they may just advise you to attend.

You might consider hiring an attorney to handle the paperwork on your behalf. And a property insurance inspection to help you find out the hidden costs of repairs that only and expert can catch.

Its a big decision. Its a noble and entreprenurial choice to buy a home in your neighborhood and restore its value to the community and enrich yourself in the process. But don't tread on the decision lightly. Do your research and save yourself the headaches down the road.

[georgiapeach]

Thanks for the advice!
I went ahead and made some calls today about it. After my husband came home and told me there was a sign in the front yard about it being auctioned for backed taxes, I looked up the legals in the local paper. Sure enough, there it was. I called the bank that was listed in the ad, and they gave me the number to their asset company. When I called them, I asked them if they were aware it was being auctioned for backed taxes. The girl asked where did I hear that, so I told her it was in the paper. She laughed and said, "No, I don't think so. We would know." Oookay. She gives me the number to the real estate agent. First I called and confirmed that the back taxes had indeed not been paid, which I should have done first. I then called the agent, and offered a number so low she laughed at me. Like I said, it's been on the market a year and a half, they've had very very few people stop to look at it and it needs a lot of repairs. So she can keep laughing. I should have kept my fat mouth shut but I asked her if she knew it was being auctioned. I could here the shock in her voice when she asked, "You mean this month?" Uh, yeah. As in, next Tuesday. She said that she was sure the bank didn't know, because they would not let it be auctioned off for taxes.
I guess we will see about that Tuesday, eh?

[eric_cartman]

i don't see any reason to buy a house. why not just put that money into gold instead?

i'm sort of curious as to why you would buy a second house, right next to your house. is it because you think the value of your house will go up because it is not next door to a foreclosure?

[Zippyjuan]

If you want to rent it out after buying it, one figure I have heard is to try to charge enough rent that you can collect enough money to pay the expenses of the property with eight months payments- to allow for time the property may be empty (and generating no rents for you) between tenants.

Or if you like the people who presenty live there maybe you could do something like this:
http://www.cnn.com/2008/LIVING/wayof...ome/index.html

Tracy Orr sat in the back of the room and prepared to watch her foreclosed home go up for auction this past Saturday. That's when a pesky stranger sat down beside her and struck up a conversation.


Tracy Orr faced losing her home to foreclosure when Marilyn Mock, a stranger, stepped in to buy it.

1 of 2 "Are you here to buy a house?" Marilyn Mock said.

Orr couldn't hold it in. The tears flowed. She pointed to the auction brochure at a home that didn't have a picture. "That's my house," she said.

Within moments, the four-bedroom, two-bath home in Pottsboro, Texas, went up for sale. People up front began casting their bids. The home that Orr purchased in September 2004 was slipping away.

She stood and moved toward the crowd. Behind her, Mock got into the action.

"She didn't know I was doing it," Mock says. "I just kept asking her if [her home] was worth it, and she just kept crying. She probably thought I was crazy, 'Why does this woman keep asking me that?' "

Mock says she bought the home for about $30,000. That's when Mock did what most bidders at a foreclosure auction never do. Watch why a woman would buy back a stranger's home »

"She said, 'I did this for you. I'm doing this for you,' " Orr says. "When it was all done, I was just in shock."

"I thought maybe her and her husband do these types of things to buy them and turn them. She said, 'No, you just look like you needed a friend.' "

"All this happened within like 5 minutes. She never even asked me my name. She didn't ask me my financial situation. She had no idea what [the house] looked like. She just did it out of the graciousness of her heart, just a 'Good Samaritan,' " Orr says. "It's amazing."

Orr says she had taken out a mortgage of $80,000 in 2004 when she first bought the home. At the time, she says she worked for the U.S. Postal Service. But she lost her job a month after taking out the loan when she says the Post Office fired her over a DWI while off-duty. She says a wrongful termination lawsuit is pending.

Without a job, she fell behind on her home payments. She sold some property in 2006 for $12,000 and paid it to the mortgage company, thinking she had done enough to save herself from foreclosure -- but to no avail, she says.

"It's just been a bad deal," says Orr, who now works at All Saints Camp and Conference Center, a Christian group with ties to the Episcopal Diocese of Dallas, Texas.

With the foreclosure auction approaching, she planned to make the nearly 80-mile drive to Dallas this past Saturday with an investor friend. But she says he ditched her at the last-minute. She went to the auction with her family, and suddenly found herself in the back with Mock.

"I always talk to everyone around me," Mock says. "I mean you can always find out all kinds of interesting things when you talk to people around you. So I just asked her, 'Are you here to buy a house?' "

Mock, who is known as the "Rock Lady" for her small business selling flagstone and other rocks in Rockwall, Texas, says she went to the auction with her 27-year-old son to help him buy his first home. He bought his home, and soon afterward Mock came across Orr.

Mock says she's using one of her business dump trucks as collateral for the $30,000 sale price. "I can't afford to just give [the house] to her," she says.

As for Orr's payments, Mock says, "We'll just figure out however much she can pay on it. That way, she can have her house back."

Why be so generous?

"She was just so sad. You put yourself in their situation and you realize you just got to do something," says Mock, who says she has trouble walking by homeless people on the street and not helping them out.

"If it was you, you'd want somebody to stop and help you."

When she told her husband of 30 years that she'd just bought a home for a stranger, she says his reaction was: "Whatever."

"He's used to it," she says with a booming laugh.

Mock says she's excited for another reason too. Orr's house is located near a Texas fishing hot-spot. "She says I can come up there and fish, and I love to fish!"


Orr, who nearly lost her home, says her newfound friend has "given me back faith and hope to keep going and hold my head up."

"Things happen for a reason," Orr says.

[tmosley]

If you want to rent it out after buying it, one figure I have heard is to try to charge enough rent that you can collect enough money to pay the expenses of the property with eight months payments- to allow for time the property may be empty (and generating no rents for you) between tenants.

Or if you like the people who presenty live there maybe you could do something like this:
http://www.cnn.com/2008/LIVING/wayof...ome/index.html

He said it has been empty for a long time now.

God, I hate how smug those damn bankers and real estate agents were to you. They ought to know by now that their "assets" aren't worth the paper they are written on.

More power to you if you can buy it for cheap and get it fixed up (make sure the pipes didn't burst before you turn the water on--if they are and the pipes are in the ceilings, you'll destroy the house when you turn on the water). That is one way that people survived the Great Depression, they rented out rooms (or in this case, next door houses).

[Bruno]

Thanks for the advice!
I went ahead and made some calls today about it. After my husband came home and told me there was a sign in the front yard about it being auctioned for backed taxes, I looked up the legals in the local paper. Sure enough, there it was. I called the bank that was listed in the ad, and they gave me the number to their asset company. When I called them, I asked them if they were aware it was being auctioned for backed taxes. The girl asked where did I hear that, so I told her it was in the paper. She laughed and said, "No, I don't think so. We would know." Oookay. She gives me the number to the real estate agent. First I called and confirmed that the back taxes had indeed not been paid, which I should have done first. I then called the agent, and offered a number so low she laughed at me. Like I said, it's been on the market a year and a half, they've had very very few people stop to look at it and it needs a lot of repairs. So she can keep laughing. I should have kept my fat mouth shut but I asked her if she knew it was being auctioned. I could here the shock in her voice when she asked, "You mean this month?" Uh, yeah. As in, next Tuesday. She said that she was sure the bank didn't know, because they would not let it be auctioned off for taxes.
I guess we will see about that Tuesday, eh?

Good research on your part.

The property itself is likely not being auctioned off for taxes, the delinquent taxes are being auctioned off, or sold, to the highest bidder through a tax sale. Its a common practice and allows the buyer of the delinquent taxes to make a profit while the county and city get the taxes paid up for their services. Win/win. In some states, like Iowa, the new tax lien holder would be able to collect a fee plus 2% per month interest. Not bad. That's 24% a year in a down market.

You might call back to see if that is the case. The mortgage company would have to pay off whoever buys the taxes before they could transfer sale of the property to a new buyer.

I worked delinquent taxes and tax sales research for years for a mortgage company, and paid them directly to county, city, and school districts.

[georgiapeach]

i'm sort of curious as to why you would buy a second house, right next to your house. is it because you think the value of your house will go up because it is not next door to a foreclosure?

Shoot, no. If they accepted what I offered, it might even drive my property value down. I'm tired of it looking all dilapidated and falling apart, I'm tired of the rats that have taken up residence in it running around my yard, and I'm tired of it sitting there empty as a magnet for vandals. The longer it sits there, the more it rots. If it sells for backed taxes, it will either sit there for at least a year until the perosn with the quitclaim deed can go to court for a clear deed, or it will sit there until the bank redeems the deed and they can find a buyer. I'd rather someone come and buy it outright before that happens, but nobody in their right mind will pay what they want for it.
I guess we will be seeing a lot of this happen over the next few years though, so maybe I should get used to the idea of my middle class neighborhood turning into a half vacant slum.

[delatx]

You can get excellent real estate advice here:

http://www.crewealth.com (Center for Real Estate Wealth)

Click on Community at the top. That will take you to the forum which is free.

You might also want to consider signing up for the free trial of the paid area of the site. If you go into the learning center, then the foreclosure section, then click on videos. There is a four part video series about how to negotiate short sales with banks.

This is a site created by my mom, Jackie Lange (a Ron Paul supporter!). She has been a full time real estate investor for over 15 years and a lot of the information on the site is contributed by Jack Miller. He has over 30 years of experience investing. Both of them do their own real estate investing seminars and speak at many other seminars all over the country. They really know their stuff!

Other options to consider would be finding another investor to go in on the deal with, or just turning the deal over to an experienced investor in your area for a finders fee.

[georgiapeach]

I did like the peple who lived there, but they moved into an apartment after they were foreclosed on. They had health problems, which is why it needs so much maintanence.
Bruno, yes, I guess you could say it is the back taxes they are auctioning off. In Georgia, they have a year to redeem the property at 20 % interest. After that, you have to take your quitclaim deed to court before you have a clear deed to the property. That process will most likely be costly, slow, and painful.
Stupid bank. They should have taken the last offer they had on the house.

[cbc58]

My advice (used to be an agent) is to call the agent back and tell them you want to submit an offer in writing. They will then have to present it. Can't hurt if you really want it.

[tmosley]

Shoot, no. If they accepted what I offered, it might even drive my property value down. I'm tired of it looking all dilapidated and falling apart, I'm tired of the rats that have taken up residence in it running around my yard, and I'm tired of it sitting there empty as a magnet for vandals. The longer it sits there, the more it rots. If it sells for backed taxes, it will either sit there for at least a year until the perosn with the quitclaim deed can go to court for a clear deed, or it will sit there until the bank redeems the deed and they can find a buyer. I'd rather someone come and buy it outright before that happens, but nobody in their right mind will pay what they want for it.
I guess we will be seeing a lot of this happen over the next few years though, so maybe I should get used to the idea of my middle class neighborhood turning into a half vacant slum.

And suddenly the idea of bulldozing houses doesn't look so bad...

Of course, it would be better to have it go to you so you could get some use out of it, but they seem to have stacked the cards against you.

[Bruno]

And suddenly the idea of bulldozing houses doesn't look so bad...

Of course, it would be better to have it go to you so you could get some use out of it, but they seem to have stacked the cards against you.

If they bulldoze it, you could buy the vacant lot and expand your yard!

[tmosley]

If they bulldoze it, you could buy the vacant lot and expand your yard!

I sure wouldn't mind that happening in my neighborhood. Things have really declined here since I moved in. This guy came in and bought a bunch of foreclosed homes and moved in a bunch of $#@!-tastic housing from the downtown ghetto they were about to bulldoze, and doubled up on the housing per lot. It's really ugly, and he gets the worst renters he can find.

It's pushed my property values way down, I'm sure.

Oh well. I think I'll just build a big wall on my setback lines and let them do what they want outside.

[georgiapeach]

My advice (used to be an agent) is to call the agent back and tell them you want to submit an offer in writing. They will then have to present it. Can't hurt if you really want it.

Aha! That's something I didn't know. As a former agent, what would you say the lowest % of the asking price would they consider? They want 88K, and a couple of years ago they it might have sold for 105k, tops, in PERFECT condition. As it is, there is a grocery list of things that need to be fixed. To give you an idea:
The roof needs patching, if not total replacement.
There is evidence of a water leak in the master bath - sheetrock is gone under the sink and the cabinet is messed up.
There is evidence of a long term leak around the kitchen window.
Much of the paneling is missing on the inside of the sunporch and there is exposed/missing insulation.
Many of the boards around the bottom of the house are rotting and need replacing.
That's just what is obvious to my uneducated eye.

[cbc58]

i have no idea... sorry.

[liberteebell]

He said it has been empty for a long time now.

God, I hate how smug those damn bankers and real estate agents were to you. They ought to know by now that their "assets" aren't worth the paper they are written on.

More power to you if you can buy it for cheap and get it fixed up (make sure the pipes didn't burst before you turn the water on--if they are and the pipes are in the ceilings, you'll destroy the house when you turn on the water). That is one way that people survived the Great Depression, they rented out rooms (or in this case, next door houses).

Real estate agents who laugh at offers should have their licenses pulled, IMO. That's no way to represent a seller. I present any and every offer I get on a property no matter what and am grateful to even get any type of offer in this day and age.

[liberteebell]

My advice (used to be an agent) is to call the agent back and tell them you want to submit an offer in writing. They will then have to present it. Can't hurt if you really want it.

Indeed. Great advice! Written offer, no contingencies (not that they'd be allowed anyway), good sized ernest money check and see what they say. Please do follow up or have your agent follow up relentlessly to make sure they have the paperwork.

[georgiapeach]

Thanks to all for the responses. Today, I made the round of phone calls again, starting with the bank. I ended with the real estate agent saying that she would not bother writing up my unreasonable offer. She's been pretty incompetent so far, so her attitude hasn't suprised me. I did let the asset company know that there have been rats running around that she hasn't taken care of, a big pile of trash by the road for the past year and a half (I've been putting some in my trash can as I have found room, but it's big) and went for a year without the grass being mowed. The person I spoke to at the bank didn't seem too concerned about having to buy the lien back for whatever it auctions for plus interest. If that's how they operate it's no wonder banks are in trouble. What a bunch of idiots.
Now I have another year of unmowed grass, rats, and complaints to the code enforcement officer to look foward to.

[liberteebell]

Un-freakin' beleivable. If I was in GA, I'd write up your offer in a New York minute and get it submitted, somehow or another.

And you're right about the banks,,,I have 2 offers in on short sales, one of which has been going on since July. And I still don't have an answer. Yes indeed, with this kind of business practices, they deserve to be in trouble.

[georgiapeach]

BTW, my husband said he didn't want to finance anything else. I'm cool with that, but that is why I haven't gotten in touch with an agent for us or talked to a lawyer. Of course, it's also why our offer is so outrageous. If we could pay cash, we could find someone to help us work on it in exchange for rent. If we had to finance, we wouldn't be able to do that. Oh well. It was worth a shot, but I don't want to overextend our finances with jobs being so unstable.

[georgiapeach]

Oh yeah, they had a short sale offer on it a few months ago that was much closer to the fair market value than what they are asking. The fools turned it down, and it's the only "real" offer they have had on it.

[georgiapeach]

I found out today that a neighbor has a bid in on the house, which he said was accepted and that they tax money was to be wired on Friday. I told him what the real estate agent had told me about the last bid being rejected, making it sound like it was still available.
Anyway, it looks like it will not be sold at auction on Tuesday, which is great! I hope he fixes it and gets it occupied soon.
He did say that there are a LOT of houses on the market in the area, and that he has banks call him every day letting him know of new ones they have available. He said the banks are very deperate to find buyers. I guess everybody here already knew that though, eh?