Have you purchased a cheap foreclosure??

[Savoir Faire]

Hey all! Right now...we're looking forward to our future. (Better than the past, eh?) We're currently renting and if we decide to buy again (we've owned two houses before in two other states), we want to do it RIGHT.

We're looking at a variety of housing options right now...our current plan is to find a much cheaper rental when our lease is up in Feb. (Thinking of going from $1150 to $800/month.) We'd eventually like to buy land and build a smaller (1200 sq foot) house down in town. We live in the Southwest US in a big city that's also a college town.

Anyway, I was searching around and I've found some interesting foreclosures down in town for around $30K. (This entire town is one big foreclosure.) It is an older home that looks like someone was flipping and ran out of cash. It has several things I'm looking for but still needs a kitchen.

Has anyone here ever purchased a way under market value foreclosure and fixed it up to live in? I'd like to be able to pay it off early (for that cheap, why not?) and then, when we'd want to sell it, hopefully sell to someone who'd make it a rental. (It's about 1000 sq feet.)

I'd love to know anyone's thoughts/experiences on this type of situation...have you done this? Doing it? Would never do it, ever? Friend did it and she went crazy?

I'm definitely trying to feel all this out...research all options...and, of course, all the Mothering Mamas are so wise!

[lookatreestar]

i would do it if you don't mind living in a construction zone. we are looking at foreclosures in az and i am comfortable with doing a lot of renovation but not having a kitchen isn't really appealing. (i lived through it as a kid  ).

[HeatherAtHome]

Our house wasn't in foreclosure but it was fairly inexpensive and needed a lot of work.

We've been doing most of the work ourselves and we're by no means experts. Google has been our friend. We know people who are working on their homes (either DIY or contractor) and ask their opinion/how they're solving their problems. 

If it's all cosmetic, I say go for it. If the house has deeper issues, I'd think about it. 

We've been working on our house for almost 2 years now. We have done a lot of demolition and rebuilding. Every time we open something up, we find out it's a lot worse than we expected. One outer wall had to be completely rebuilt because it was rotten (part of the addition, so not a HUGE wall). We're taking 2 layers of siding off the house now and have found that the windows used to leak quite a bit and damaged all the logs underneath them. One area is a foot wide, 3 or 4 feet high and 1/3 of the logs deep. It's hard to see stuff like that. (The main part of the house is built with logs)

Everything always takes longer, ends up costing more, and is so much more exhausting than we imagined. Our roof leaked this winter so we hired someone to put on a new one (went with metal so it cost more but will last 40 years). Loved the guy so much we're bringing him back to do the insulation/siding so that we don't have to worry about whether we're doing it right or not. Because no matter how much we read up and learn, we always wonder if it's REALLY the right way. AND, it's exhausting to have to become an "expert" at everything. It's nice to just have someone come in and do it without worrying all the time. 

We live in a constant construction zone. We have "good" rooms and work areas. But the good rooms aren't that great because often we have extra furniture pushed into them. I get depressed because our house often looks messy but I can't put anything away because it has to go into one of the construction rooms. It has become habit to rinse less used dishes when taking them out of the cupboards because we seem to always have dust floating around the home. 

Actually, most of the construction happens during the summer and we take winter off to relax. Which is a nice way of saying we go into semi-hibernation because our house has been SO COLD. We're working on insulating it. Fingers crossed this winter will be good. 

Anyways, by this fall our house will look great on the outside and most of the major stuff on the inside will be done. Next year we'll work on the basement (unfinished) and the "extras" outside: garage/carport, porches, decks? etc. 

We see this as our 'forever home' and have put a lot of love into it. Even with all the extra money we're putting into it, it's still coming out cheaper than buying a 'better' house (which would still need work) and half the cost of a 'finished' house. 

If I sound a little down about this it's because we're in the middle of DH's vacation and have 3 projects on the go. It will be worth it though. Actually, I can see taking a 5 year break than buying a small house in the college town nearby, fixing it up and renting it out. 

[mattemma04]

Beides a forclosure consider estate sale homes.The sellers often just want to get rid of it fast and will sell at a deal.

[heatherdeg]

We've done it.  I think your problem COULD be financing.  If the house isn't actually habitable, you can't get a normal appraisal on it.  You can still buy it, but it would have to be through the 203k program (which is not a complete nightmare, just not easy).  Now, these days (ESPECIALLY if you'll be living in it) the bank will fix it enough to get it operable and get through an appraisal.  You're in the southwest where pipes freezing/bursting isn't so much an issue but up north--you can pretty much write off the plumbing working.

We are currently living in a foreclosure we bought in December and renovated.  We just moved into it 2 weeks ago.  It cost us 80% of the appraised value.  And although the difference between the sale price and the appraised value was 20%, we still had to pay PMI because WE only put down 5% from the sale price.  They will only give you equity "credit" for the percentage you put down from whichever is lower: appraised value or sale price.  For us, we wanted to reserve our cash for the renovations.

Tomorrow I believe we will be going into contract on another one that we'll use as a rental.  I honestly suspect something must be wrong with it because it's the exact same model as ours, on the same street (literally 2 doors down) in much better shape, on a larger lot, that already has appliances (nice ones--ours had NONE), and with a finished basement (vs. our 60" ceiling height storage basement) and it's the same price.  :O  So we'll see tomorrow... but I'm excited!!!!

Foreclosures, although quicker than short sales, still take forever to get closings on.  If ANYthing is wrong, the process of bidding out, fixing it, possibly discovering something unexpected during the repair (even something tiny) and the having to go through the process again to get it approved... well, it takes time. We've been involved in about 3 of them in the last year and each one dragged on at least 2 months beyond the initial closing date (and one fell apart 24 hours before closing because the house flooded--only to find that FEMA moved the property INTO a flood zone well after we were under contract and outside of the 5 days we had to confirm it was NOT in a flood zone... and FEMA did this 5 days before our initial closing date.  So thank GOD it got pushed out!!!)

They're not always sure things and you're not always going to know exactly what needs to be done--so it better be an incredible deal.  They're out there, though!