Buying a foreclosure you know something about

[JHZR2]

I'll start by saying this - it's an acquaintance that I don't know a ton, but see from time to time. Long story.

I'll also say this - I've seen some "how to" and informational stuff, but most of it is really for "investors" who are going out foreclosure hunting, to find that gem property that they can get rich off of.

So long story short, someone I'm acquainted with is apparently getting foreclosed upon. Big deal? No. Except that his property has a number of what could be garages/workshops that would've perfect for storing cars and doing projects. The extra outbuildings are on a somewhat separate part of the lot, Zillow shows it as a separate parcel without a price/value, it's not buildable by size/layout (narrow) and it fronts the side street (the property is on a corner).

I found this out because the guy asked me if I wanted a few like new woodworking tools that he had to get rid of. Got there, there was a uhaul with trailer and a bunch of people going through stuff. He has two homes, the bank is getting this one, all dealings are with the bank.

Immediately I contacted the tax collector to find info on the parcels, back taxes, etc. I know the loan is with Wells Fargo, which do have local branches, though I have no idea if they deal with this.

So, since I know this is happening, I know he is being evicted, and I know the mortgage holder, what are the best steps? I don't want this to get on the streets. Heck, I'd even borrow money from Wells Fargo to buy if it keeps the deal internal.

A few other things I know:

- the house hasn't been updated by modern standards for stuff like kitchen/bath - not sure what issues would need to be overcome to get a coo.
-the house has a detached garage in addition to the outbuildings I want
-two of the four outbuildings have severe roofing issues, like holes, such that I'd assume the seller (bank) would have to fix or offer as is.
-if the bank and town would consider the outbuildings seperable as another (nonbuildable) lot, I'd consider acquiring it by itself, otherwise I'd be willing to buy the entire property.

We have stelllar credit, high income, and earn more than the actual property is worth. Not sure if buy the property cash as I don't have enough free on hand, so I'd take some sort of loan.

Having the property would mean a decent place to store and work on cars once repaired, and the house could be a decent rental - it's pretty large.

So, having not done this before, where to start? Recommendations?

P.S. I did ask if he would sell the back half of the property or let me deal with the bank to try to work a deal to get the property and clear one of his issues. He said it's done and over and he's moving and its in the bank's hands now... So between Wells Fargo a I.

 

[The_Jeff]

Originally Posted By: JHZR2

- the house hasn't been updated by modern standards for stuff like kitchen/bath - not sure what issues would need to be overcome to get a coo.


You should be grandfathered in, unless you're using this as rental property, or if rental-ness is implied, eg a duplex/ multi family.

Some jurisdictions also make you bring seemingly unrelated stuff up to code when you do a remodel; for example a larger "egress window".

Would you buy the whole property, keep the garages, and rent out the house, if you had to, and couldn't subdivide?

 

[JHZR2]

Originally Posted By: eljefino
Originally Posted By: JHZR2

- the house hasn't been updated by modern standards for stuff like kitchen/bath - not sure what issues would need to be overcome to get a coo.


You should be grandfathered in, unless you're using this as rental property, or if rental-ness is implied, eg a duplex/ multi family.

Some jurisdictions also make you bring seemingly unrelated stuff up to code when you do a remodel; for example a larger "egress window".

Would you buy the whole property, keep the garages, and rent out the house, if you had to, and couldn't subdivide?


I wouldn't live there. My only desire is the outbuildings as they are solid concrete garage-size structures. Four of them. If I were able to ONLY acquire the outbuildings, they would be for personal/private use only.

I'd be willing to become a landlord if the deal was right and it was the only way to get the buildings. It would be single family.

 

[cat843]

I think there has to be a foreclosure auction. If no one buys it then the bank owns it and can sell it for what they want.

With a foreclosure auction if there is extra money after the mortgage, taxes and expenses are covered, then the money goes to the prior owner. That almost never happens however.

 

[hatt]

I don't know the laws in NJ but I'd think it has to go through the entire foreclosure process and be sold at auction. If the process hasn't gone too far you may could work out a deal with him and the bank.

If he's still in there and will let you check out the property in detail, it may give you a leg up come auction time.

 

[The_Jeff]

My town won't let someone "just" build a garage on a parcel of residential property. (It could be different for existing property.) This sort of thing could potentially hinder subdividing. Learn more from your town!

 

[JHZR2]

Originally Posted By: eljefino
My town won't let someone "just" build a garage on a parcel of residential property. (It could be different for existing property.) This sort of thing could potentially hinder subdividing. Learn more from your town!


These are outbuildings that are closing in at 100 years old. I know in my town there are a few standalone garages that were once barns or associated with other properties.

These specific ones exist, they associate with the property under foreclosure, they supposedly pre-date the house currently associated with them, which looking at them and the build/structure, Id probably believe.

Ive contacted the tax collector for the town that the property is in, to understand the labeling and parceling of these structures. Ive also asked for the zoning POC and any other recommendations of who to talk to about this.

Its what else beyond that, especially with the bank. I hear that Wells Fargo is a bunch of imbeciles, but Ive also never been one to accept the processes without trying to see if a deal could be made. I just don't know how to best initiate this one...

 

[JHZR2]

Originally Posted By: hatt
I don't know the laws in NJ but I'd think it has to go through the entire foreclosure process and be sold at auction. If the process hasn't gone too far you may could work out a deal with him and the bank.

If he's still in there and will let you check out the property in detail, it may give you a leg up come auction time.


I know the property and the issues with the outbuildings. He was rushing to get stuff out before the sheriff (?) comes...

Id think that they would want to short sell it or come to another resolution and get rid of it if they (the bank) could, before having to go through a long process of foreclosure with the property tied up for a while after that etc. But I don't know what I don't know.

Id hate for the property to get out to the public...

 

[Wolf359]

I'm a broker, but in a different state. If he's getting out, did the bank already get a court judgement to get him out? Usually they do some sort of cash for keys deal so if he took the deal, then I guess he's out. Otherwise it's usually a while before the bank gets him out so it's usually best to just stay there until actually kicked out by the sheriff. And you can try and find out about the auction. I've been to a few of them and what typically happens is that the bank ends up bidding a real high price, so they end up with the property and then they throw it on the market later at the market price. In that case, it's just a bidding war as to who will get it if the bank prices it low.

Also in terms of a short sale and foreclosure, those are two different departments in a bank. You can't short sale it unless you have an offer to present to the bank. In theory the banks are supposed to be able to approve a short sale in advance, but I've never really seen that happen. With the foreclosure department, they start working on it once it gets beyond a certain point. It may be too late at this point. Also if the owner doesn't have a hardship, the short sale probably won't be approved. You need to find out from the owner what the outstanding loan amount is and figure out what the value of the property is to see if it's worth just buying it from directly and paying off whatever is in arrears. Usually when people end up in foreclosure, they owe more than the house is worth, but sometimes there's equity and they don't know that they should sell before it gets foreclosed on because they will get more that way than if the bank has to fire sale it and then they also tack on all their penalty and fees.

 

[Pop_Rivit]

There's no choice at this point-if he's "rushing to get stuff out before the sheriff comes". It's beyond the possibility of a short sale. Despite what you may want, the bank has an internal process that is required to be followed.

And at this point I can assure you that there are plenty of people who know what's going on with it, and if it's worthwhile they plan to bid if it goes to auction.

 

[Dave Hess]

Maybe its better that the property goes to an auction.

How much would your offer be ?

 

[BMWTurboDzl]

Zoning is probably legal-nonconforming 'grandfathered use' if the house is really old.

Be ready with a check.

 

[hatt]

If it's an odd property maybe that will be a turnoff to a lot of buyers at auction.

 

[Dave Hess]

Some bidders might want to buy the property.... bulldoze it and rebuild.

 

[Doog]

Call wells Fargo real estate owned department and see if it's up for sale yet. Foreclosures usually take a year.

 

[JHZR2]

OK, some more details:

-its actually a single attached house (it shares one wall). Therefore bulldozing it is a non-starter
-While it could use some work (e.g. a roof), the house and its primary garage are actually pretty decent. Not a wonderful place, but passable as far as I could see, with limited work.
-Its the four extra outbuildings which arent in the greatest shape.
-Apparently the Sheriff will be coming on Tuesday or so. For what that's worth, it may mean that there is still maneuver time and/or opportunity to do something else.
-Wells Fargo has no foreclosures listed in my zip code, or in the zip code where the property is. When I searched for any foreclosures in a larger area, every one seemed to have a different listing agent, making it tough to determine just who I would be best off contacting.


I was looking at buying another stand alone garage in another town that didnt work out due to a combination of an odd inefficient layout and back taxes. However, in that situation, the owner was foreclosed on for the neighboring property, but was able to split the garage off as a standalone property which he sold! So these things DO happen, believe it or not. And that's precisely why whatever is going on, Id like to try to be proactive about it and see what can be done.

So there's a process. Great. That process also is very expensive for the lender as they have a liability, with a lot of property taxes on it per year, which they have to pay while dealing with this. If the opportunity arose to take it off their hands, I wonder what leeway they have. There is much online saying that auctions can be cancelled or postponed, and deals can be made with the trustee or owner up to auction time. I dont even know what state the situation is in yet. That's sort of my reason for asking for others' experiences...

The owner does not want to talk about it. He is of the mind that the sheriff is coming, he needs to go, he owns another home, so he's walking. That does not mean that he is necessarily at step a, b or c, but rather that he isnt interested in dealing with the property.

Im just not sure if there are certain steps that should be taken. Again, I contacted the town's tax collector and asked also for info on zoning. I can make a proposal to the town and let the bank know what my intent is.

I know the bank that holds the note. However, am I better going to the local branch or contacting a likely inept national line?

If it goes for sale, is it a Sheriff's sale or does the bank itself auction it?

There's a ton of fluff out there between get rich quick schemes, and attempts to "move up" in house through buying a foreclosed property. Im interested in neither. Im not shopping, I know what I want, I know what its reasonably worth and could rent for, I know reasonably the things wrong with it just from chatting with the owner and looking it over myself. So...

Are there recommended books to buy on how to set up deals with foreclosures? Particularly books that are technical and legal-heavy, and not get rich quick schemes with fluff that does not help with real detail and knowledge?

 

[Wolf359]

Talk to a local real estate agent for more info. Basically to sum it up, you may be pursing a pipe dream.

You don't really have more info than anyone else. If it's just a sheriff's sale, it could just be the bank doing the foreclosure. You don't know if they're going to bid or what their reserve bidding is going to be, in the past I've seen them bid the total amount owed plus penalty and fees which could be way more than the house is worth. Once they own it, it gets assigned to a property manager who handles several hundred properties, that's why they take their time getting back to you and the longer they take, the higher the bids they're likely to get. Lately they've been sending out appraisers and determining what the market value is and then fixing up the property if it needs it, they aren't the total disasters they were in the past. Normally what happens is that homeowners will price their homes at 105-110% of market value, but the banks will price them at 95% or so of market value so that sometimes generates a bidding war so that after you're done, they get close to 100% of market value or more.

I don't think contacting the town tax collector is going to matter, the bank typically pays off all outstanding taxes or if you're the winner bidder, you may be stuck with the outstanding tax bill. You should also do some sort of title search on the property and make sure that it's the first mortgage that's being foreclosed on, years ago people used to bid on 2nd mortgages without realizing that there was a first mortgage and they were really buying nothing because the first could still wipe them out. It's probably a first though.

Good luck trying to contact the bank. Unless you actually know someone at the bank, I don't think you'll get anywhere. These properties are usually assigned to an asset manager and they don't just sit around waiting for you to call. They usually have 50-100 properties to manage or more and they can barely keep up with the offers that they get. And as others said, the bank probably contracted someone to do the auction, but they also have a representative there to put in their bid. Been to a couple where you think the max price should be a certain amount and boom, the first bid is from the bank and boom, it's over the top and that's it for the auction. I used to sell lots of foreclosure years ago, but there aren't that many now and everyone chases them, no one was chasing them when the market was still going down.

 

[JHZR2]

Good insight, thanks!

 

[Win]

The problem with having your car shop separate from your dwelling, is the vulnerability to theft.

Hence, the notation on the S-10 below. I have my car shop across town, because I already owned the property, thinking that high visibility location might be a protective substitute for daily visits. It's not - if thieves want it, fences, buildings, etc. won't stop them.

So, I would consider the vulnerability of your property first. Given the plethora of issues you've outlined, personally, I wouldn't fool with it. If you don't already own a property, and have to have an off site car shop, look for an old gas station that has had the tanks pulled, or buy a lot and put a steel building on it. That's my two cents, FWIW.

If you are Hades bent on this one, let it go to public sale - that concludes potential prior interests. If someone wants to bid, let them have it. If not, contact the bank after the failed sale.

 

[Andrew1972]

Having worked on helping a major mortgage company streamline their foreclosure process with a new web application. There is no such thing as instant sales given the workflow that occurs. Not all properties instantly make it to auction and can sit.

Just don't expect anything quick.