Questions about buying a foreclosure home in CA.???
My husband and I are thinking about buying a home that is in foreclosure, but are unsure of a few things.
*The property we are considering has been in this other family’s hands for ten years, but a couple of years ago they took out a $350,000 2nd mortgage. So between the first and second mortgages they owe close to $700,000. The property now is only worth about $425,000. From what I understand, it is the second that they have fallen behind on.
So, if we were to purchase this property, would we pay what the home is worth, or would we somehow be responsible for the entire debt?
Also, does anybody know anything about the HUD Officer Next Door program? (It’s where officers can buy HUD homes for 50% off) The website says their are no homes in my desired area at this time. Do they use foreclosed homes for this program, and if so will it be just a matter of months before they are flooded with available homes?
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Before you rush forward to buy a foreclosure, stop to think about some of the drawbacks and repercussions if you can’t get in the house to inspect the interior.
Who Is Living at the Property?
If the property is occupied, the successful bidder is typically responsible for removing the occupants, who may not be the previous owners.
They could be relatives or friends of the owners, renters or squatters. You might have to evict them.
If you are unfamiliar with eviction processes, you should hire a lawyer to handle it for you.
Be aware that tenants who are sued for eviction sometimes retaliate.
A better solution might be to pay or bribe the occupants to leave.
Non-Owner Occupied Homes
One such home in Yolo County, California, was rented to a dubious couple: a former convict recently released on parole and his partner with sketchy credit, who flinched at loud noises like a domestic abuse victim.
The seller, unaware that his deed of trust contained an “assignment of rents” — meaning the lender had a right to collect the rent if the owner did not make his payments — stopped paying on his piggyback loans and didn’t much care who he rented to as long as they paid him. Fully intending to pocket the rents and forget about his mortgage loans, the seller listed the rental for sale. His agent made an initial attempt to gain access to the home. The ex-con, a neo-Nazi with a shaved head, massive tattoos and holding back a barking pit bull, peeked through the door and then slammed it in the agent’s face.
Soon as the For Sale sign was planted in the lawn, the tenants stopped paying rent. Neither the lender nor the seller could collect any money from the tenants. The agent could not show the property. This was an ugly situation. The lender filed for foreclosure and vowed to file a deficiency judgment against the seller, which lenders can do in California if the loans were not purchase money.
Condition of Foreclosed Homes
Because these homes are purchased “as is” from the lender or HUD, there is no guarantee of condition. Sometimes it is possible to inspect these homes prior to making an offer but sometimes, as in the above example of the home in California, access is not granted.
When sellers realize they are about to lose their homes through foreclosure, it’s not uncommon for them to stop caring about the home.
If something breaks or malfunctions, they aren’t going to fix it.
If they are angry or desperate enough, it’s possible they might actually destroy the house. An effective way to flood the home is to turn on all the water faucets, plug the drains and leave. Others smash out walls, then pull out the copper pipes and wiring to sell as scrap metal.
Owners will also sell the appliances and kitchen cabinets.
Some horrible-excuse-for-human beings even leave animals behind, locked inside without food or water.
Buying foreclosures is not for the faint of heart. It’s best handled by the pros and is not recommended for first-time home buyers. I don’t care what seminar you attended — if it’s not giving you this information, it’s not preparing you for reality.
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HUD actually purchases the homes themselves and then resells them, usually at a loss. They only have so much funding, it does not matter how many homes are available, they will not be buying more. Also, they only buy homes in “distressed” neighborhoods (bad side of town) with the idea of moving normal people into the neighborhood it will improve.
As far as this house…..
Is it already foreclosed? If so you are OK to buy it, the second already settled with the first, which is what they need done to sell the house.
If it is “in foreclosure” you need to move on. The first still holds first place, so they will want their entire 350k and the second will have to settle for remaining 75k, loosing 225k.
They are more likely to settle the first and just sit on the property for 2-3 years until the market improves. Their investors will not go for a 79% loss. If they wait it out their total loss will be much less.