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The perils of buying a foreclosed home
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David Reeves at his home in Matthews, N.C.
TEXT OF STORY
TESS VIGELAND: Headwinds. They marched across the country this week in the form of wintery weather. And they apparently continue to march across the economy, according to Treasury Secretary Tim Geithner.
On Capitol Hill this week, he warned that the financial recovery faces significant headwinds, including continued problems in the housing market. Realty Trac said this week that 307,000 households received some sort of foreclosure-related notice last month. And 2009 will set a new record with nearly four million homes going into default. Now, potential buyers may think all this is a boon for them. But there's a lot more to buying a foreclosed home than coming up with a down payment and getting a loan.
We'll have some practical advice in a moment, but first a personal story from one of our listeners in Matthews, N.C.
David Reeves: My name is David Reese and I bought this home as a foreclosure in early 2005.
Julie: Can you take me inside and show me?
Reeves: Sure. I'll be glad to.
When we looked at the house, the asking price was $183,000. We offered $180,000, very close to the asking price, because it was a bid process. Only after the bid was accepted were we allowed to do things like turn on the water and the power and really get inspected.
My wife, the inspector, my father-in-law were all here at the same time and the inspector gave us the bad news. Now, I'm pretty handy and I think I'm pretty smart, but this inspector found 10 things that would be in the $2,000-$5,000 range to fix that I didn't even see. Now the guy came back and I said, "Well, I guess we won't buy the house" and the inspector said, "Well, it's structurally sound, I'm not saying walk away from it. Maybe you could just negotiate some of that in." And that I told him it was a foreclosure and it was a bid and he was like, "Oh."
You can see now it looks like a normal wall, but when we moved in, in addition to being dirty, there were actually holes -- kind of like if you miss somebody kicking 'em and you miss somebody punching 'em. And the ceilings inside were kind of green and stuff growing on 'em and the bathroom was carpeted, and I don't even want to get into that, yuck.
It turned out, from talking to the neighbors, that this used to be, I guess, you could call the "drama house" of the neighborhood. A lot of stuff happened here, law enforcement visited here. We didn't know any of that before we bought the house. But the biggest unexpected thing was that the folks that owned this house were in a lot of trouble with a lot of people. And all those people have come looking for them since we moved in.
I keep a pen in the mailbox to send back all the mail. And then we've had sheriff's deputies coming out here and you know, they're just doing their job, but we're law-abiding citizens, and it's alarming to have a police car in your driveway, coming to your door, asking who you are, asking who lives here and you just never think that would happen.
I thought I knew what I was doing -- correctly estimating the effort to get it ready to move in and fix it up -- but it's turned out to be more. And I would say to anybody, that if you're thinking about buying a foreclosure in a neighborhood that you're not sure you want to live in, I wouldn't. It's not worth it.
Vigeland: Listener David Reeves of Matthews, N.C. spoke with reporter Julie Rose. And we've got photos of his house at our Web site, Marketplace.org.
I just recently bought a forclosed home that was initially valued at $330K but we bought it for $195K. Really a great deal and so is the house. There were some minor bad craftsmenship such as doors slightly warped or installed bad however overall the house is great! almost brand new as well! The key note to take aways is to do your homework on the house and inspect it very carefully especially if its forclosed. Thus far I havent had any problems with our house.
My hubby and I bought a foreclosed house. It had been winterized and empty for 8 months before our closing. There is no way to do a full inspection on a winterized house, so we bought as is. We already knew there was a failed septic, but didn't know about the leaks and water softener problems. It took 5 months for us to clean, excavate the trash out of the yard, paint, fix leaks, install septic (which is my husband's business) before we rented it out. All neighbors were very happy to have previous owners gone. Your story rang very true to me. Buying a foreclosure is not for the faint of heart (think pot of soup left on the stove for 8 months) or pocketbook (say septic to any rural homeowner and you get the idea)!
Very interesting how you talked about foreclosures and green technology in the same show! My wife and I did buy a foreclosure in Chicago, after having done a lot of research. We were not looking for a 'ready to move in' property, but for a 'trashed' placed with solid bones. Our goal is to rehab the property with green and sustainable technologies (such as mentioned in your show). We consider this as a sound long term investment with long term pay backs. The trashed foreclosure was a perfect match for our plans. (We document the project under: http://delafleur.com/blog/)
My husband and I bought a home that was in foreclosure. It was a new construction that had been lived in for only about 6 months before the family was evicted. There were holes in the walls, nails randomly placed through out the house, a broken window and no yard. Oh, and mystery stains all over the first floor carpet. Everything was fine with the house structurally and so we went ahead with the purchase. It took a lot of hard work and tested our fix it skills, but I we got it livable in 2 weeks, and up to snuff for the neighborhood (put in a landscaped yard, replaced the flooring) in about two years. It was worth it for us, the comps in the neighborhood are going for 50% more than we paid. But, it is a great neighborhood that we wanted to live in. We did continue to get collection notices for the previous owners, but soon those went away. The best was, unrelated to them, the collections phone calls that came with our new home phone number. We really enjoyed the one that told us if we didn't pay our bill they were going to come out and tow our house away...a two-story house with a full basement, stick built...Yeah, I’d like to see you try.
