Tuesday, September 1, 2009

Step 2 - finding and buying a foreclosure- Easy Right?

After working out the area and the criteria for my house, I started looking with my realtor, Kathy Wilke from Coldwell Banker in Jackson. (email: kathywilke@amadorca.com)
(Kathy gave me permission to use her name and I can't recommend her enough!)

House #1

So in Feb 2009 - after looking a few houses, I made an offer on one that I had seen online and looked at in person. It was listed around $225,000 but it had major water damage. It also had a bathroom that was best described as "hollywood horrible". It had those makeup lights that were about 6 ft long over the mirror and everything was gold and pink. The centerpiece of the bathroom was this enormous jacuzzi tub.. big as an outdoor spa. It had a water heater in the closet just for that tub. I made an offer that I felt was fair and it included the bank fixing the major damage to the house. The bank countered back that they would make the repairs but kept raising the price... it was actually comical. Every new repair quote meant that they would raise the price to me to cover the costs. I don't know why they thought I would go along with that but after a while the lack of reason, and complete disregard for logic got to me. I made my final offer and they declined. I heard that the house went through 2 other offers with the list price going lower and lower. Just heard from Kathy that the house sold at auction finally way way below the original list price and way below what I offered.

House #2
I went to look at the house I would eventually buy Mokelumne Hill. I made an offer and sent it in to the listing agent who was a good friend of my agent. The offer went nowhere because the bank was changing brokers. The offer sat in limbo for weeks and then another person put an offer in as well. When the bank finally got it's act together and contacted me, I decided to pull out and let the other people have it. I was putting an offer on house #3 and felt that it was the better one for me.

House #3
The original house I had spotted online for sale in Wilseyville had fallen through and was back on the market. It had been over 6 months in escrow and didn't close. I went to see it and it was perfect... on the river with a big house and views that were just incredible. It had a mobile home on the property that was just a mess... animal waste and water damage inside. The main house seemed in good shape with just horrific wall paper and overgrown plants. So what was holding this terrific place up from selling? 2 things...  the PGE transformer blew out and burnt up the well pump so no water, and that modular home. I talked to my bank and they said no issue if I can get the pump fixed and the modular home removed. I made an offer and waited and waited. The original listing agent was "offended" at how low my offer was but really, it had been on the market for 9 months with a fallen through escrow and I thought it was a good offer. (I actually thought it was comical, the listing agents reaction. Most realtors want to sell and don't take it personally if you make a low ball offer. She was really hurt! Like it was her house!) Waited some more and found out the bank was changing their broker again! (Kathy was just flabbergasted at this... seems like the banks were just sitting around for an offer for me and then deciding to make a change.)Waited some more and finally things were set up and the bank looked at the offer and guess what? The property had a competing offer for over asking price! I backed out because I hit my upper limit... and went off to lick my wounds.
Wasn't buying a foreclosure supposed to be easy? Weren't the banks trying to just get rid of these properties? The follow up to this property is that this deal fell through as well a couple of months later. Eventually the property did sell but it took months to get the lender to approve the deal because of the modular home.
Who knew that something like that would hold up a deal? The modular home was not the main residence, it had been used as a rental. But banks didn't like it.. no clue as to why.

So now what?

I took a break for a bit because this was getting frustrating for me. I had the cash and the credit to buy a house. I was looking at distressed properties where the bank had lost their shirts and pants. I knew the real estate market and how to "do a deal". I am not a novice or a "lookie loo" but a serious buyer who was willing to put 20% down and close quickly.  I do my research, I know my budget, I have my financing and I don't "waffle", so why couldn't I close a deal?

Here is what I figured out up until this point.. the banks are not emotionally tied to the deal they are just looking at the "bottom line". At house #1- the bank had lost over $200,000 already on just the loan amount. (It was a 100% financing deal for over $400k - 4 years prior.) They knew that the damage was extensive but they were smarting over the loss and didn't want to admit to a complete write off. I was the 1st person who made an offer and so they had hope still... in the end the bank lost almost everything on that property. The damage was just not water damage but septic and well and the estimates to repair everything were around $50,000.
The banks used clearing houses or brokers to manage the sale of the property and those brokers picked the listing agent. They are all different companies and different personalities.. never know what they are thinking. And they change! About every 6 months the agencies and the listing agent can be completely swapped out! You are at their mercy and their time schedule and if you are needing to buy a place quickly because you are moving, you are out of luck. The new broker is usually completely swamped already and now they have to get up to speed on this property that has been dumped on them.
Reason and Logic don't always have anything to do with buying a house. Luck, Patience and good timing seem to be the key.

Next I will detail what I had to go through with the house that I eventually bought... you think this is bad? Wait until you see the ending... :)

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