Foreclosures

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WanderAimlessly

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Foreclosures have been in the news lately and the topic of many commercials in the area. I am wondering about if it is ethical to take advantage of others misfortunes and buy a foreclosed property?
 
You can always buy a foreclosed property. The question is how? Will you buy it from the bank after foreclosure is complete? Will you buy it from the owner during the process of foreclosure and assume the mortgage? Or will you give a minimal amount for a quit-claim deed, leaving the owners under the impression that they will be off the hook, when in fact they will not?
 
My $.02. You are either helping the bank and the people who work there, or you are helping the folks who are foreclosing avoid problems with the bank. I don’t see any issues here.
 
The point I was looking at in the foreclosure process was at the point where the banks have taken the property over. At this point the asset has been taken from the person.

The thing is, are people who are buying these properies taking advantage of other people’s misfortunes and is there any moral objections at that point?

I admit, I am thinking of looking into foreclosed property (there is alot around here) for my first home. It would allow me immediate equity for home improvements (I watch alot of DYI).
 
WanderAimlessly said:
The thing is, are people who are buying these properies taking advantage of other people’s misfortunes and is there any moral objections at that point?
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No, there is nothing morally objectionable about this. The foreclosure was done through honest channels and it is the property of the bank.

I understand your concern for the former homeowner, but once it is the bank’s property they are going to sell it for a fair market price, or whatever they can get for it. If not to you, to someone else.
 
Absolutely - go for it. As long as you had nothing to do with the reasons that led to the foreclosure. If you are not culpable, then you are not taking advantage of anything.
 
WanderAimlessly said:
The point I was looking at in the foreclosure process was at the point where the banks have taken the property over. At this point the asset has been taken from the person.

The thing is, are people who are buying these properies taking advantage of other people’s misfortunes and is there any moral objections at that point?

I admit, I am thinking of looking into foreclosed property (there is alot around here) for my first home. It would allow me immediate equity for home improvements (I watch alot of DYI).
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You are right - there are TONS of opportunities in our area right now, and it just kills me that I have a house that would just sit on the market with everyone else’s. There are so many homes we could afford right now, and I would so love to move, but I just know I would not be able to sell.

SOOOO frustrating!!! :mad:

Anyway - I say take advantage of this for you and your family! I don’t believe this is bad thing at all. You could find a wonderful home out there just waiting for some TLC. Being a first time buyer in this market is a very very good place to be - you have SO many options!!

~Liza
 
lizaanne said:
You are right - there are TONS of opportunities in our area right now, and it just kills me that I have a house that would just sit on the market with everyone else’s. There are so many homes we could afford right now, and I would so love to move, but I just know I would not be able to sell.

SOOOO frustrating!!! :mad:

Anyway - I say take advantage of this for you and your family! I don’t believe this is bad thing at all. You could find a wonderful home out there just waiting for some TLC. Being a first time buyer in this market is a very very good place to be - you have SO many options!!

~Liza
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Being single leaves my options wide open. The only thing really holding me back may be a change in careers.
 
If banks cannot foreclose when debtors don’t pay, or if they can’t re-sell the property after the foreclosure, then banks cannot issue mortgages, or can only issue them to people with immaculate credit ratings. And that means fewer people can afford to own homes.
 
WanderAimlessly said:
Being single leaves my options wide open. The only thing really holding me back may be a change in careers.
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Well, then you deal with those cards at the time they are dealt.
You can’t beat a foreclosure deal. You can always re-list it if you do change careers.

So is the real question…is the IF a real possibility? Something wayyyy down the road. or just a thought ( just enough to make you nervous)?

I only ask because I am your Mudgy friend and I care.
 
I suppose it’s possible to lose money on a house, but I never did. Owning a home is a wise investment – particularly if you’re stable in your job and family life. Over time, inflation works in your favor, so your house payments become much smaller than rent – and you acquire a house, a valuable asset, in the process.
 
Nevertheless, during the 80’s many people did lose money on homes. Remember the Resolution Trust Corporation? They took over many of the foreclosed homes and loan paper owned by the defunct FSLIC. At one time they had boxes and boxes of pending foreclosures stacked around the walls of temporary offices, just wating to find time to take action on them.

If every home could always be sold for the amount of the mortgage, there should in theory be no foreclosures, since the owners would sell the home for enough to clear the mortgage before it got to that point.
 
JimG said:
Nevertheless, during the 80’s many people did lose money on homes.
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True -
And you will probably see foreclosures increase again as many folks with ARMs scurry to pay the increased interest.

But you cannot argue the fact that you can get a whopper of a deal on a foreclosure.
 
jrabs said:
But you cannot argue the fact that you can get a whopper of a deal on a foreclosure.
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It depends. Is the bank willing to sell the property for less than market value? Why should it?
 
JimG said:
It depends. Is the bank willing to sell the property for less than market value? Why should it?
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Because they want to get them off the books as soon as possible. They are a liability
 
WanderAimlessly said:
Because they want to get them off the books as soon as possible. They are a liability
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Yes, that may be the case. But if the bank is servicing a mortgage guaranteed by FHA, VA, MGIC or some similar entity, they may be guaranteed to be made whole in any case, thereby lessening their willingness–or even ability–to bargain.

However, some of these entities, knowing that they will be liable for a claim after forclosure is complete, may be willing to help the homeowner sell the home before foreclosure. For example, in a “short sale,” the homeowner, because of accrued interest and fees, might have to take money to the closing table for a sale to occur–money which he doesn’t have.

The guarantor might be willing to pay this shortage to facilitate a sale, rather than pay a larger claim later. That way the home never even hits their inventory.

Trouble is, not all collectors or loan servicers may be aware of the options available.
 
IMHO there are times when it is not proper to do so. If you so under-price the re-sale price while leaving the debt sky high and(this was done in the 1960’s in south Florida and then again in the Midwest with farm land and equipment in the 80’s) it does not reflect a fair market value for the property, then leaving the person holding a debt they can never repay can be doing a wrong to others. As long as you pay a fair price then you are fine.

Many of these homes were over priced, over mortgaged and the banks knew about this. IMHO those that gave the original mortgage, knowing that the people purchasing the home could never keep up the payments, will have to face God just as we do when the time comes.
 
Working in a real estate attorney’s office we have been handling foreclosures CONSTANTLY!!! IMHO, to buy them they are a good idea. I don’t see anything wrong with it. You can even choose to purchase them from the owner before it is foreclosed on (in most cases you don’t assume the mtg, they just pay it off and either take a loss or get $0/pay $0). Just be careful and don’t necessarily buy one at a tax sale from the County b/c the person who owes the taxes has up to a year to pay the back taxes and take the property back. (the don’t tell you that on those midnight real estate commercials!).

If you got any questions about the process let me know & I’ll try to answer them!
 
JimG said:
It depends. Is the bank willing to sell the property for less than market value? Why should it?
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Because of the old phrase “time is money”. The bank is in the business of (literally) buying and selling money. It “buys” money when it accepts your deposit and returns the amount to you with interest. It “sells” money when it loans you money and arequires you pay it back with interest.

A house in the bank’s portfolio is simply costing it money in terms of lost opportunity - the opportunity to lend the value of the house and make a profit on the lending. The sooner it sells the house, the sooner it has cash to loan. The longer it takes, the more interest it could be making but doens’t - that is lost opportunity.

In a hot sellers’ market, the bank is not going to lower the price much below market value, as it will move about as quickly as the one down the street. In a slow market, the bank will deal harder as it wants it gone before the one down the street.
 
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