I was positive the hunger strike was over and then…

I was positive the hunger strike was going to be over last Friday and then the whole plan fell apart, and its all because of a foreclosure property. Let’s go back a couple of weeks…

Nice young couple in search of their first home, expecting their first child, want to move closer to family and they’ve got a price range in mind. They had a home picked out, a foreclosure, but months and months later with no progress (more on this later) from the foreclosure company they are giving up on that property and searching for another. So the search began, they’ve got fairly detailed needs/wants so there wasn’t a lot of options.

We looked at a For Sale By Owner (nicely remodeled, a little on the small side, strong animal odor, a little high on price), then a foreclosed home (surprisingly not trashed, big enough, needs a roof, priced right) and another home (very dated, heavy smoke odor, smaller, way too high) and then we took a second look at the foreclosed home. Yep, that’s the one. We discussed the ups & downs of foreclosures, the process and they set out to make sure their pre-approval for financing was in order. I called the listing agent to let her know that we were seriously interested & to let me know if anything new emerged on this property, no problem she’d let me know.

Fast forward to last Thursday, the buyers and I met at the house and looked it over again. Yep, it’s still the one. We wrote up an offer and I presented it to the listing Realtor. Perfect, she would get back to me with the foreclosure companies answer as soon as she could. Then the worst happened and I didn’t even see it coming… the listing Realtor called about 4pm on Friday and said the property had been sent to an online auction company and they hadn’t even told her. What!?! Are you kidding me?!? What now!?! Lots of questions and lots of digging later I find foreclosure companies do this sometimes to get rid of problem properties, ie: needs work to sell, bad area, no showings, etc. The home will be sold only through the online auction company, they will do no repairs, no allowances and there will be no inspections. Who knows why they decided to move this one on other than it needs a new roof right away but yet it hadn’t been on the market very long.

So low and behold I don’t have an ending for this story yet. We are still trying to navigate our way through it, they still want the house but I’m not sure we will find traditional financing on an “as is” home. I can’t in good faith suggest that anyone buy a home without an inspection and financing is a very tricky issue these days on its own.

What I’ve learned (actually I knew but even I forget sometimes)… Foreclosures sound like a great deal. Everyone wants to buy a property for pennies on the dollar and are willing to put their sweat equity into them to fix them up and have instant equity & make lots of money.

1. Many foreclosed homes are trashed. Remember, the non-paying owners often live in the home for 15-18 months before the home is finally taken through foreclosure. Owners who are no longer making payments and know they’ll eventually be kicked out don’t take care of things anymore. Leaks are ignored, they don’t care if a window is broken, carpet stains are left to rot, fists fly through walls during a rampage, the electricity & heat are often shut off causing even more problems. You get the picture.
2. The previous owners often take (steal) everything that can be removed when they are finally forced out. I’ve seen properties missing light fixtures, counters, garbage disposals, carpet, doors, decks, furnaces, etc. If it can be removed they can either use it or sell it. Is this illegal, absolutely. But most foreclosure companies realize if they are losing the house they probably don’t have any other assets to go after to penalize them.
3. The foreclosure process is a long, complicated, drawn out process. There is the actual “taking” of the home, getting the owners out of the home, clearing the title, getting it listed, getting it sold. It’s a paperwork nightmare. Many times there are liens against the home from the previous owners medical expenses, or home equity loans,  or child support issues, or garnishments or court orders. These all have to be cleared up prior to a new owner buying the home. Many times these things aren’t found until a prospective buyer’s lender requires a title opinion and then clearing these items up just slows down the process even more.
4. Then you’ve got the chain of command… the listing Realtor has the contact who actually called & listed the property but then that person has to clear everything with their supervisor  who answers to a guy in another division who actually has to wait until he gets approval on anything (price changes, offers, etc) from the “group” who oversees foreclosures for the company. Oh and did I mention the contact person rarely knows what’s really going on with a property and usually has no real idea where Iowa even is.
5. Add to this that the majority of foreclosures we are seeing in our area are owned by the “big four” lenders. I won’t name any names but they are 4 very large companies that do a lot of mortgage lending. It’s great that they are out there & many, many people have gotten mortgages through them but when it comes to foreclosures, it’s just another blip on their radar screen. They have hundreds, maybe even thousands of foreclosed properties, they don’t “care” if you’ve fallen in love with the house, they don’t worry that my buyers are on a time schedule, etc. Somewhere in maybe New York City, is a high-rise building,  with a guy sitting in a tiny cubicle who just got word that he better figure out a way to move 37 properties by the end of the month and not lose more than X amount. That’s what they know.