Category Archives: Housing

How (not) to buy a foreclosed home – Part 2

Part one discussed the backwards economic forces of the foreclosure market and how cash is king.  In part two, we’ll discuss one of universalities of buying a home.

Some things are universal when buying a home.  When a real estate agent talks about “location, location, location”, it’s really just a lazy way of saying that research is everything.  Yes, in a normal housing market, you’re going to pay more for a good location and that’s all you need to concern yourself with, but we’re not in a normal housing market.  Location still matters, but the idea of location is kind of turned on its head.  So what you really want to do is research, research, research.

This is the only part of buying a foreclosure that’s actually fun.  If you love the city you’re in, this gives you a good chance to explore your city.  If you’re doing your research right, you get to learn a lot about the history of the neighborhoods that you are looking at.  For instance, the neighborhood that I was looking at was once almost entirely Polish, but in the last few decades the Polish population has moved further northwest and been replaced with a mostly Hispanic immigrant population.  They, in turn, have slowly been migrating west and getting replaced by hipsters as prices rose.  All that came to a screeching halt, though, when the housing bubble burst.

Now, the neighborhood has lots of distressed housing.  Commercial properties are empty, lots are vacant, houses are abandoned and in disrepair.  This makes the neighborhood sound really bad, but it actually isn’t.  It’s still a good family neighborhood and it’s close to both public transportation and a major highway.  It has just hit a rough spot.

So if you have a population trend interrupted by an economic disaster and a good neighborhood hit particularly hard by said disaster, you have lots of opportunity.  Yes, it’s still a gamble.  Yes, trends may not continue.  Yes, the economy must improve to make this worth while.  I like to think, though, that it’s all about odds.  Odds are the trend will continue.  Odds are the economy will improve.  And just like you can usually fee pretty comfortable when you’re playing blackjack and you have a 20 and the dealer’s showing a 9, I like my odds.

Short sales are rising

I have noticed that the percent of foreclosures has been dropping recently and the percent of short sales has been rising.  Now, we have a possible explanation.  It turns out that the big banks, as part of a settlement are required to provide either principle reduction or allow short sales.  The banks get credit for either.  So they are offering as many short sales as allowable per the agreement.

In some ways, this is good.  Families can get out of their debt burden without the massive credit hit that foreclosures would cause.  But I’m pretty sure the spirit of the settlement was to keep as many homeowners in their house as possible and the missed mortgage payments have already hurt their credit rating.  Plus, they will still need to find a place to live after the short sale.  So, in the end, it’s just more of the same.  As they say, banks will be banks.

How (not) to buy a foreclosed home part one

The housing market is still, by most measures, crap.  The good news is that it’s looking more and more likely that we’re at a bottom.  Sunny days are here again.  Or something like that.  If you have money, of course, the sunny days really never left.

And that leads me to the first step in buying a foreclosed home.  Have money.  Lots of it.  I don’t know if the foreclosure market is always like this or if its current incarnation is just a function of the really horrible housing market combined with a disastrous financial sector.  Whatever the reason, most foreclosures require you to pay with cash.  If you have the cash, though, you can pick up a foreclosed house for well below current market values.

If this seems like a perversion of economic motivations that favors a class of people that doesn’t really need any favors, well it is.  Welcome to the second gilded age in America.

We have a middle class that would have enough money to buy the foreclosed houses and need to buy the foreclosed houses if they could only get easily affordable loans (which the banks won’t let them) and if they were able to use loans to buy the foreclosed homes (which, again, the banks won’t let them).  So, in the next few years, what we will see is a bunch of rich people buying homes they don’t need to supplement incomes that are plenty big already.  And the beat goes on.

If you are sensing some ambivalence on my part about buying a foreclosed home, you are observant.  But just like the Cylons, I have a plan.  Stay tuned.

I’m building a house!

I recently bought a house that was foreclosed on over two years ago for pretty darn cheap.  Like cost of the land cheap.  Yay, me!

As you can imagine, the house wasn’t in the best of shape, but I still had hopes that I’d be able to renovate it and turn it into a livable abode.  It turns out that, while I could have done that, with the renovations that were necessary, it’d cost only a little bit more to tear the sucker down and build new.  So that’s what I’m doing.

I’ll be blogging about the progress here under the category of ‘Housing’.  So those of you who are thinking about buying/building your own house can learn something about the process.  It’s going to be slow going for a while since winter will quickly be upon us and I’m still coming up with a design.  I’ll fill the time in between now and construction with my travails so far.  And let me tell you, nothing in my life has caused so much anxiety as this house has.  Stay tuned!