Determined to Buy Foreclosure?


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While foreclosures are indeed “Endless” sadly, they are not in a “Plateau”.  They are continuing and will continue to increase in the weeks, months and years ahead unless by some stroke of luck there are some massive changes all the way up the food chain.  Without those changes, we will see an ever-expanding list of stories just like those in the article below.

These stories were difficult and heartbreaking to read…and puzzling.  Because woven as an undercurrent through most of them was the idea that purchasing a foreclosed home would somehow help improve the situation.  I’m not convinced, but let’s walk down that path for a moment.  Let’s say you are determined to purchase a foreclosed home in today’s market.  The only way this could ever come close to not shooting yourself in your financial head would be:

1.  If the prudent and ethical realtor said something like this to the potential buyer, “Well, this looks like a good deal for you, and I can see that you want to purchase this home, but here are the list of problems you face (see yesterday’s blog posting for the list) so let’s file an action to Quiet Title and make the expense of that filing, part of your acquisition cost of the home.  This would smoke out so to speak, whoever had a legitimate claim against the property”.

2.  If the potential buyer had a lot of cash sitting in some type of a savings account.  For this hypothetical example, let’s say our buyer had tens of thousands sitting in a 401k program.  We know that our American dollar is losing ground every day, and we know the stock market is not a good place to be right now, so maybe rather than watching the value of those dollars diminish with each passing day, cash them out and put them into a material roof over your head.  

3.  If the potential buyer went line by line through the proposed title insurance and made sure he/she actually got title insurance worth the paper it was written on.  Most of the title “insurance” nowadays has the homeowner indemnifying the title insurance company along with waiving all their rights to sue should there be problems in the future.  That’s not title insurance.  Watch this blog for an upcoming article on title insurance and how to make sure it’s worth something.

4.  If the potential buyer calculated the cost of a future law suit (for when/if the foreclosed-upon-homeowner returns for their home), and deducted that price from the cost of the home.

May the force be with you.




The Chicago Tribune reports from Illinois. “Congressional candidate James P. Hickey’s finances are coming under scrutiny. The Tribune has found the former mortgage broker filed for bankruptcy last year and lost six rental properties to foreclosure. Hickey pins his financial woes directly on the housing market collapse. Hickey’s family of six bought a new $600,000 Orland Park home. But by 2008, he said, the businesses started drying up and tenants stopped paying as they lost jobs. The following year, Hickey said, he shuttered his companies while foreclosure suits on his rental properties started rolling in.”

“‘I have been there in the trenches,’ Hickey said. ‘I know what it is like to have to decide between putting gas in the car and food.’”

The St Louis Dispatch. “Kirk Lewis had a heck of a time moving to St. Louis. His employer wanted him here, and he wanted to come. But how do you get rid of a house in the depression state of Michigan? So, Lewis waited as his home sat on the market for about six months before a buyer knocked. The price was ‘nowhere near what I was asking for,’ he said.”

“But Lewis figured he would make it up when he became a homebuyer in St. Louis, and he was right. He found ‘an overabundance of homes’ and ‘a lot of value.’ Sellers asking $300,000-plus for homes were willing to knock 10 percent off to get a deal. Lewis and his fiancée bought a four-bedroom, three-bath home on a golf course in Wentzville. ‘It worked out real well,’ said Lewis, who closed the deal in October. The drubbing he took in Michigan matched the bargain he found here. ‘It was a wash,’ he said.”

“Buyers certainly think they’re in the catbird’s seat. ‘Every deal is harder to get done. Buyers want the price reduced,’ said real estate agent Diana Mayfield. ‘But the market isn’t as bad as they think it is. You can’t get everything at half price.’”

The Middletown Journal in Ohio. “Ohio’s housing vacancy rate jumped 50 percent between 2000 and 2010, the 10th largest leap among the states and far above the U.S. average of 33 percent, the Government Accountability Office said last week. Across the nation, the number of vacant housing units, excluding units for seasonal migrant workers, climbed from 6.8 million in 2000 to 10.3 million in 2010, a change of 51.2 percent.”

“‘The job loss, the foreclosure crisis are compounding on each other,’ said local real estate expert Doug Harnish, principal of Market Metrics. ‘The market has declined, assuming there is a market. There are homes in many, many cities where you couldn’t sell a house at any price.’”

The Zanesville Times Recorder. “Although Perry is one of the poorest counties in Ohio, its unemployment rate has risen from 8.2 percent to just 10.5 in the past 10 years, compared to the adjoining counties of Muskingum, which has 11 percent, and Morgan, which has 11.4 percent. Kathy McMillan, of Sayre & McMillan Real Estate, admits employment is down. ‘But we have become a bedroom community,’ she said. ‘We have had a number of foreclosures, but many people are starting first homes and bringing them to life again.’”

“Her business partner, Richard Sayre, agreed that the economy is not like it was five years ago. ‘Houses were appraised so high during that period,’ McMillan said. ‘But it was easier to get a loan.’”

News Net 5 in Ohio. “It’s a foreclosure pilot project proposal, that if approved, could significantly speed up the foreclosure process in Cuyahoga County. ‘Setting a date will impress upon the parties that the court is actively engaged in the process,’ said Cuyahoga County Common Pleas Judge Nancy Margaret Russo. ‘It increases the accountability of the parties throughout the process.’”

“In a study prepared by the Federal Reserve Bank of Cleveland, researchers found the 27,000 homes sold carried a county assessed value of $4 billion; however, the actual sale price of these houses may have totaled as little as $2.6 billion. The report concluded that Cuyahoga County residents who sold their homes in 2010, may have lost as much as $1.4 billion in value. Russo is hoping her proposal will be approved and put into action into action as early as January 2012.”

Fox 4 Kansas City. “Investigators in the small Missouri town of Wood Heights say that they may have walked into the filthiest houses they have ever seen, and now police say that the people responsible can’t be found. Authorities serving a foreclosure eviction on the home just east of Excelsior Springs say that the place was filled with abandoned pets, and nearly every inch of the floor was covered with animal feces and trash.”

“‘There’s no clean spot in this house. There’s nothing, there’s nothing that’s liveable,’ said Kristina Baxter of the Excelsior Springs Animal Control. ‘There’s no place to sit, there’s no place to sleep, and these people just moved out last night and that’s what really floors me.’”

The Journal Sentinel in Wisconsin. “Mortgage foreclosure filings in November jumped 16.9% from the same month last year in southeastern Wisconsin, but filings this year still remain behind 2010’s pace. Economist Brian Jacobsen said jobs and new household formation – young adults going out on their own – are crucial to a housing recovery. ‘With over 6.4 million mortgages delinquent and over 2 million homes being repossessed nationwide, it looks like we’ve reached an endless plateau in terms of foreclosures,’ said Jacobsen, senior portfolio strategist at Wells Fargo Advantage Funds and associate professor at Wisconsin Lutheran College.”

“‘Job creation would help, but so would household formation. A lot of kids moved back in with their parents and families have combined households. With only 600,000 households being formed this year, that is well below the 1.5 million pace in 2006.’”

The Fond du Lac Reporter in Wisconsin. “Comparing October 2011 vs. October 2010, home sales increased 20.8 percent in Fond du Lac County, 11.3 percent in the Northeast part of the state, and 13.5 percent in Wisconsin. Home values continued to sink in most markets, including Fond du Lac. Statewide, the median home price dropped 5.7 percent compared to last year. Northeast Wisconsin sank 4.9 percent, and our county fell off 6.7 percent. Sellers have to continue to take into account that foreclosures continue to weigh on the market, affecting even their own home.”

“Take out your favorite pair of sneakers and you might see the Nike swoosh logo. Tracing it with your finger, you’ll see that it goes down sharply but then rises slowly to the right in a gradual but strong fashion. This is how I see the housing recovery. Buyers will have to take heed. Prices will start to rise this coming year, mortgage rates are still incredibly low, and there are ample homes from which to choose.”

“Sellers will still have to price their homes aggressively to get noticed. There is well over a year’s worth of homes on the market, and a balanced market has only six month’s supply. So take a hint from that famous shoe swoosh: Just do it.”

The Des Moines Register in Iowa. “Kyle Golay saved for nearly two years to come up with the down payment for the $224,000 home he wanted to buy in West Des Moines. The 25-year-old didn’t need to go far for financing, though. His father, Doug Golay, banked the purchase, with a below-market interest rate, no credit check or closing costs. ‘The money could sit in the bank, where it wasn’t earning much, or we could invest it in our son,’ said Doug Golay. ‘He is repaying us with a better interest rate than we could get from a CD.’”

“Doug Golay said he’s confident his son is a good risk and said he would offer the same deal to his other son once he graduates from college and has a good job. ‘You can rent and waste money, or you can buy and wake up in 20 years and find your home is mostly paid for,’ said Golay.”

The Globe Gazette in Iowa. “The owner of several rental properties in Mason City apparently skipped town without paying his bills, leaving more than 60 tenants in limbo and a bank holding mortgages totaling more than half a million dollars. Cathy Burtness, director of the Mason City Housing Authority, said she was able to find housing for all of her tenants except one who wanted to remain where he was and who had a different landlord who was fixing up the property.”

“‘The others are vacant unless there are vagrants,’ she said.”

The Star Press on Indiana. “One of the Muncie Action Plan’s biggest successes to date has been getting community members who are working individually on the city’s problems to work with each other on solutions. For example, Ball State University architecture instructor Cindy Brubaker’s graduate students in historic preservation were assessing vacant houses in the 500-700 blocks of West Main. The students then proposed to the group three ways to make a short-term impact on the abandoned houses on West Main: a lawn cleanup, boarding up windows and doors, and cleaning out the interior.”

“Not only does boarding up houses protect them from scavengers and the elements, ‘it also keeps them from looking so bombed out,’ said Bill Morgan, the city’s historic preservation officer.”

News and Tribune in Indiana. “During the Southern Indiana Realtor Association luncheon last week, the year’s events were discussed with optimism. Part of the optimism is a growth in SIRA membership, more than $2 million in real estate sales and more than 3,400 active listings. For even more encouragement, SIRA welcomed guest speaker Dan Breault, EVP, regional director, RE/Max of Indiana. ‘You are qualified and you make a difference in the lives of the people you serve even in a lousy time,’ said Breault.”

Posted By: Ben Jones


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