We may have found a (foreclosed) house - help! (long)

DH and I have been following a foreclosure online for a bit now. The whole process started months ago, and this past weekend they've finally hit the "bank owned and on the market" state. We went to the open house, and then last night we brought our very knowledgable realtor with us to check it out more thoroughly. We love it. Well, we love what it could be. It's in the exact neighborhood that we wanted, and the street itself is beautiful. The structure of the house is amazing: high ceilings, large LR, DR, kitchen, master, hardwood floors, back deck, pro installed paver walkway, etc. There's a new roof and chimney, and of the 2.5 bathrooms, 1.5 are brand new.


However, there's also a ton of work to be done. Aside from the lovely tile floor and track lighting, the entire kitchen needs to be gutted: cabinets, countertops, all appliances, even a small wall needs to be knocked out. The master bathroom doesn't even have walls - there is just a gaping hole! The attached garage has been converted into an exercise/man room, but it's not insulated. The detached garage has a huge wooden beam in the dead center (making it impossible to park a car - WTH?!) The carpets are dirty, the hardwood floors need to be refinished, wallpaper is everywhere. It needs the driveway repaved and a fence around the yard (for our dog). And to top it all off, only the entry level floor is ventilated for central air! There are no vents in the entire upstairs: three bedrooms, two bathrooms - nothing! And the downstairs room has one vent in the steps for the whole level - and that includes a large family room, office, half bath, laundry room, and garage room! We would need to have a whole new system with ductwork installed!


I know that this should be intimidating, but we're actually excited by the prospect. DH and I would love to hire professionals to make the kitchen and master bath exactly what we want, and we were looking forward to having a few projects of our own (we're handy, but not handy enough to build an entire bathroom from scratch). The only issue becomes cost. This house is obviously listed low for the neighborhood (about 2/3 of the price of similar sales), and is significantly lower than the cost of homes we had been looking at that are in move-in ready shape. However, the cost of repairs and renovations is clearly obscenely huge. 


Our realtor told us about an FHA 203K loan that can be taken out along with the mortgage, but the total loan can only equal the home's appraisal value. For instance, (these aren't real figures, just an example), let's say the house sells for $250k but is appraised for $300k - we could only take out the total loan for $300k - meaning only $50k for renovations. And I'm not sure, but I think we can also only have certain approved contractors do the work if we borrow more than $35K (which we would clearly have to do.) That would mean our tried and true contractors might not be eligible :(


Now here are my questions:


Have any of you bought/tried to buy a foreclosure? What was your experience like?


Do you have any knowledge of the FHA 203k?


If you're only average/above average on the handy side, did you try to tackle any big projects yourselves? How did that work out?


Did you have to hire certain contractors?


Also, I heard that people who take out FHA 203ks have the opportunity to buy necessary appliances for a discounted rate. Is this true?


Thanks so much ladies!

Posted on May 4, 2012 at 3:00 am
fromcoldtofire
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apm2012
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We looked at quite a few foreclosure homes. There are some huge foreclosed homes in suburban Detroit for a steal. However, most were in need of a lot of work! We looked into the 203K loan for one of the homes but my realtor was strongly against it for two major reasons. The first, there is a limited list of lenders that offer 203K loans. Second, the terms of the 203K loans may state that the funds allotted for renovations cannot be dispensed until all work is complete. That would mean that the contractor would have to be willing to work without pay until the end, and the buyer may have to front the cost for supplies.  These two factors scared us off of the 203K loan.


Aside from the loan issue, we were concerned about the "unknowns" with a foreclosed home. Our realtor really educated us on the process that it takes for a home to be foreclosed on and also the fact that the sellers will most likely have not kept up on the maintenance of the house (especially since the seller was going to lose the home with nothing to show for it).  She was also very good at "eye-balling" some of the needed repairs and the estimated cost to repair.  She advised us that the best situation to buy a foreclosed home is if you have a lot of cash on hand to fix up items in the house.


Ultimately, it just was not what we were prepared to get into, so we went a different route.

Posted on May 5, 2012 at 12:01 pm
Jaryce21
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fromcoldtofire...


I bought a foreclosed house with a 203k loan last year... and let's just say, it is one of the harder loans to get out there... the loan itself, not so bad, but the work in between to get these loans was a roller coaster... only because the realtor and loan processor. If you have a trustworthy team with wont be so hard. Just a lot of hard work and determination is alls you need... with that, 203k loans EFFIN ROCK!!


Here is what I learned from my 203k experience...



  1. its a great way to make your house exactly they way you want it without having to come up with the cash up front

  2. appraisers must be from recommended list from bank

  3. you have to pay for your own inspection (if you are getting an "as is" property, find the best inspector in your area!! You get what you pay for. Be super careful when purchasing "as is" homes)

  4. your contractor has i think 90 or 6 months to complete work upon purchasing the house

  5. Contractor get's paid 50% when begins work and 50% when work is complete

  6. 203k loans release the contractor money super fast

  7. You can pick your own contractors!!!

  8. Get at least 3 bids from different contractors

  9. If you have the time and energy, you can actually do all the work yourself for way cheaper

  10. FHA 203k loans require a monthly mortgage insurance aside from the house insurance. for the first 5 years you have to pay an additional amount to protect the banks if you miss a payment. This payment gets dropped after the first 5 years, but the sucky part is that after the 5 yrs of payments, it does not come off your mortgage. This money paid is basically chalked to the game! whatevs.

  11. When you do purchase the house, it is an AMAZING feeling seeing all your hard work come to life. You actually get to design your house the way you want it. 


Here is my journey from when the beginning to end. 

AW: Putting in an offer <--- i put in two offers this day. One being a foreclosure with an offer using fannie mae, homepath loan


 

Q: Who has laid down their own floors <--- when i was in contract and thought it was going to be a simple FHA loan. ha!

 


OUCH! Man down! Man Down! <--- when I found out my house didn't approve for a reg FHA loan

UPDATE: The Gloves are off!! <--- this is when I found out about my options of different types of loans and decided to go with FHA 203k!! THIS IS A PERFECT THREAD FOR A QUICK RECAP OF WHAT 203K OFFERS

THEY PULLED THE PLUG! <--- Food For Thought: Get everything in writing no matter what!

UPDATE: 203K Loan <-- a break down of what i want done

UPDATE: Bidding Wars!! <-- comparison of 2 houses i was offered on and deciding between the two


 

My heart is broken <-- where im at mentally with the 203k loan

OFFER RE-ACCEPTED!!!! <--- offer re-accepted for the 3rd time!!! oh gawd!

I don't know how to take this news? Feelings of miscarrying and getting word from underwitter


 

What we thought was a miscarriage... <-- was an ectopic pregnancy and lead into major surgery =(


 



WE DID IT! our house is finally a home =)

fromcoldtofire I bought a photo 3348175-1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Posted on May 6, 2012 at 9:03 am
SanFran
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Have any of you bought/tried to buy a foreclosure? What was your experience like?


We did!  The process was mostly fine...it was just kind of hectic because the closing timeline is more condensed.  Also, bidding was MEGA competitive--although this might depend on your local market. (Getting a pre-approval letter from the bank who actually owned the property helped!  This worked out fine since we got a better rate with them than with our regular bank.) We were able to knock off a bit of our final offer price after we conducted inspections.  


Do you have any knowledge of the FHA 203k?  


Yikes. Not at all. And now I'm thinking/ wishing I had? 


If you're only average/above average on the handy side, did you try to tackle any big projects yourselves? How did that work out?


We're exactly in your position! We liked the potential of the house. It's still very much liveable right now, though. But we loved the idea of making our favorite spaces our own. (i.e. we always complain that there's something wrong with every single kitchen we see, so this was our chance to make it exactly how we wanted.)  We're going to have to do things gradually because it's going to get expensive fast.  So far, we've hired people to re-do some flooring and install recessed lighting throughout.  We could have probably done the flooring, but we got a good price through Costco so we just went with it.  I'll be honest: I don't think we'll be tackling big projects ourselves.  I'm a little OCD about how I want things to look (and I'm pretty sure I don't have the skills to make it happen.)


 

Posted on May 7, 2012 at 7:46 am
fromcoldtofire
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Thank you, girls! Jaryce - I actually read your post verbatim to DH - you don't know how helpful it was!


We're still looking at other houses, but this one is keeping a place at the top of our list. I'll let you ladies know what develops.

Posted on May 9, 2012 at 2:41 am
Jaryce21
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I'm so happy I was able to help. Let me know if you need any advice or suggestions. I know 203k loans like the back on my hand... especially if it is a foreclosure... especially if it is an "as is" property... yes, I went threw it... but it was oh so worth it!


We spent about 20k on upgrading and demoing and rebuilding. This is what we did.



  1. Laid down dark laminate flooring in formal room, dining room, family room, upstairs hallway. We were able to pick out a moderately priced laminate since we didn't have to come up with money up front. It looks so real.

  2. Ripped up the carpets from the stairs and laid hardwood for the steps >>love<<

  3. Laid down tiles in the foyer, kitchen, 3 bathrooms and laundry room

  4. Rewired electricity

  5. Demoed garage and rebuilt it with built in storage cabinets

  6. Bought a new garage door >>yeehaw<<

  7. bought a GE fridge and a GE dishwasher, new garbage disposal and a new kitchen faucet

  8. screens for all windows and sliding doors

  9. Demo'd this massive bar/counter top

  10. Repaired holes in walls


We were going to have our contractor paint the whole interior, but when he gave us a price tag of 5k for paint alone, we decided to paint ourselves. We only spent about $800 on paint and material... so we were happy about that.

** The most awesome part about having a contractor was that he finished all the work in a month!! We purchased the house April 29th, started work May 1st and moved in June 5th! It was pretty amazing. 

Let me know if you need me for anything! Good Luck!
Posted on May 12, 2012 at 6:38 pm
WMforever
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Jaryce your my inspiration!
Posted on May 17, 2012 at 2:22 am
jmbuss9
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I agree^ @WMforever!!!

Posted on May 17, 2012 at 7:26 am
Jaryce21
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I love you guys. I'm not exaggerating when I say it was probably one of the toughest times in my life. People were saying "Jaryce, just face it. This house was not meant to be" Well, I refused to listen. With a lot of hard work, dedication and time... anything is possible. LMAO. Let me know if any of you need my help or advice with anything. =)

Posted on May 19, 2012 at 4:22 pm

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