Finding the solution to most problems is difficult because most people “know” the answer before they begin to solve the problem. Things that don’t “fit” into the neatly designed solution are not even considered.
Modern vernacular calls this approach, “thinking outside of the box.”
So, everyone knows that you can get a great deal if you buy a foreclosed home. Problem that has only recently come to the attention of just about everyone is the bank may not “really own” the home they want you to buy.
As a Realtor, I have warned clients of the dangers of buying foreclosures for years. And pretty much everyone thought George was a nitpicky kind of guy that didn’t want them to get a great deal. They had heard that foreclosures were a tremendous bargain and so they wanted to get one.
And of course they are a wonderful way to get a home cheap, but only if you know what to look out for.
Now, I have personally bought foreclosures for two decades. And I never bought a house that someone later claimed was theirs. And there was never a huge mortgage on the houses I bought that I did not know about. And I always had to pay cash within one day of the purchase at the Court House.
The current foreclosureastrophy has brought all of the difficulties of buying foreclosures to public attention. If you are looking to save a bunch of money by buying a foreclosure at what may be very close to the bottom of the real estate market, there is an easy and simple answer.
Avoid Banks.
Now my radical idea will do nothing to help the banks. They have made their mess and they will have to get out of it by their selves. Maybe with the help of the taxpayers. But, other than paying taxes, you do not have to help the banks and you can still get a great bargain of a foreclosure.
Private individuals have been making mortgage loans, probably for longer than there have been banks. Some people “carry back” a mortgage when they sell their house and move to another home. Some people like me fix home up and sell with “owner finance” and some people invest their money in mortgages because it pays more interest than the bank pays.
Granted there are only a few private mortgages that are foreclosed on compared with the huge numbers handled by the banks. And, that is a good thing.
Most of these mortgages are foreclosed one at a time. Often done by attorneys that have represented the mortgage holder for years. The title searches are done one at a time and the chance of mistakes is much less than the product of the foreclosure mills. Just check any recent newspaper for a horror story about the mass foreclosures. Your attorney general is already looking at what is going on in bank foreclosures.
How to buy a private foreclosure?
Look through the foreclosure records at your court house. If the name of the Plaintiff ends with the word bank, keep looking. Look for what looks like the name for a real person. “Beardsley v. Home Owner.” You will find a few. Contact the person or the person’s attorney and tell them you want to buy the house.
Be prepared to make many offers. Real people can be much more reasonable than a bank. But? Not Always. Of course you need to know value, you need to be able to estimate the cost of repairs with some degree of accuracy and you most probably will have to come with all cash to buy, just as though it were a bank.
But, with a real person, everything is negotiable and your chances are that you will get a better deal (after being turned down a few times) and the terms are whatever the two of you agree to. And the problem of the person selling house not owning it pretty much goes away. But your vigilance is still required.
Make sure you close at an attorney or title office, get title insurance and I would recommend checking out the title search yourself. The professional title searcher is far better at it than you, but you care more and an extra set of eyes can’t hurt.
We have recently done this and then sold the house we bought using the Famous Rent to Own on Steroids Program
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