'01White3.2CL

I live in the North suburbs of Chicago and was looking at a forclosure list b/c I was more curious than anything. 97% of the forclosures are in the South and West suburbs of Chicago...I need not add any other detail about those neighborhoods for people outside of Illinois.

Anyway, I found 2 very interesting listings both within 15 minutes of my house. I went to view both of them from outside today. i only knew street names from the listings and looked for the empty properties.

1). a foreclosed house in a nice, clean area seconds from one of the bggest shopping malls and minutes from the expressway and lake michigan. it is listed by the lender (who now owns it obviously) for $10,000 and has a current market value of $484,500. I looked at all houses on the street and it came down to 2 that looked abondoned, which i thought would be this property. It didn't look like it needed too much work.

Is this really too good to be true?!?!?

2). a (i assume) 5-10 unit apartment building in a safe neighborhood, but in a shitty section of it going for $17,100 with a current market value of $474,500. this place can obviously be rented out, but i know nothing of its condition...

now with foreclosure, you pay the price listed, you own it. then you have to fix up the property which can double that number easily. then you have to sit on it until markets get better which means paying alot of taxes.



are any of these worth it? what is the catch? can anyone chime in who has real world experience with purchasing foreclosed properties to flip?

Thanks,
Luigi

Jiggy2dmax

iTrader: (1)

If its too good to be true, it most likely is.

I would say that the listings are prolly BS, even foreclosures can only be sold for so little which in many cases the bank holding the loan would have to approve.

thunder04

iTrader: (1)

Just because a property is listed at a certain price doesn't mean that's what it'll sell for. Banks tend to list properties way low in hopes to draw attention and create bidding wars. They typically sell in the ballpark of market value (at least that's the way it is here in California).

MR1

Talk to a local realtor. You are missing lots of information and it sounds like something is wrong in your example. If it was as easy as you are asking about, nobody would be in trouble.

I'm from one of the areas that you lightly slammed and own property there. I can assure you that a. those are not the only places with massive realty problems and b. you are wise to stay away if you don't know what you are doing.

NSXNEXT

iTrader: (2)

Expect to have to a ton of cash readily available for the massive amount of repairs you will have to do. Typically when it's priced that low, it's missing basic things like wiring, plumbing, floors. And no I'm not kidding.

It's like the ebay ads you guys see all the time for Ferraris for $5000.

doopstr

Wait, I can get a Ferrari for $5,000?

'01White3.2CL

ok thanks guys! it does feel like something is up...

basically i want to start doing research on this kind of thing as i continue to save money then hopefully in a couple years ill have enough knowledge and $$$ to make a move.

'01White3.2CL

also one more thing:

the one detail that helped me believe these is that supposedly the lender (who has nthing to do with real estate) could care less about market value! supposedly they only sell for what is worth on the property then hand it over. so essentially if only $10,000 is owed on property 1). above, thats all it takes...

but of course as NSXNEXT points out, it would probably take 5x that or much more to fix up a ~2000 sq. ft. house (probably the "much more" is needed for my standards a.k.a. i study architecture and want to apply it in the real world and learn about real estate...)

thunder04

iTrader: (1)

Foreclosures aren't all bad for buyers. I just bought a foreclosure and made out pretty well. 16 year old house that needed mostly cosmetic work (nothing major). If you look hard enough, you can find good deals.

Like NSXNEXT mentioned, there were TONS of foreclosures/short sales I looked at that would've needed at least $30-$50k of work done to them before they were livable (add that to the $300k to buy the house which was already my limit!).

However, if you can buy a house for $10k, and the cost of rehabilitating it is at or less than what it would be worth, then it's worth it. There are special loans available that allow you to finance extra to bring the house back to life.

thunder04

iTrader: (1)

Stupid 5 minute edit...


However, if you can buy a house for $10k, and the cost of rehabilitating it is at or less than what it would be worth in functioning condition, then it's worth it. There are special loans available that allow you to finance extra to bring the house back to life. However, the bank would be stoopid to sell that low. Even if one house only has $10k mortgage, there are many other mortgages they hold that are way under and they've gotta make up the money somehow (in some cases mortgage insurance will help them, though). Also, most banks hire realtors to sell their properties, and that Realtor would obviously want the highest commission he or she can earn (wouldn't you?).

Of course, all my experience is based on the Bay Area and Tri-Valley areas here in California. Your results may vary.

SiGGy

I agree...

$10k on a $480k house? What's the land value? I'm going to guess more than $10k! If the price is below the land value the number is just pure BS. Even if it's a complete tear down the sale price wont be under the land value.,

Foreclosures don't sell that cheap... It just doesn't happen. The only way to get a deal that good is to buy the house from the owner before it goes into foreclosure.

Anachostic

You might have to assume the taxes owed on the property. Most county appraisers have a searchable website where you can get the info on the property and what the tax status is.

'01White3.2CL

^ good call, I know how to look all of that information up which i just learned from the real estate office i started working at...you now know where all of this finger-crossing is coming from!

and thanks for all of the info guys!!