Foreclosed Homes Are Work & Labor of Love
Are you getting a bargain?
The media makes it sound so simple to buy a foreclosure. It isn't! The home is usually fraught with some complications. You definitely need to find how long the home was in foreclosure. Then if you are serious about bidding, ask yourself if you will be living in the home during renovation? I can only speak from my own experience. We chose NOT to live in it during its renovation. I am pretty certain we would have gotten a better deal, if we waited. Then the bank would have been stuck with it and we might have had the chance to negotiate a lower buying price. The house needed much work. We had a contractor walk-through the home with us to help us figure out what the repairs would be. But looking back, you do not know what is really involved until you tear down walls and see what is behind those walls. I can tell you that many will charge you cost plus 10%. Do yourself a favor and ask if the 10% includes the hourly wage the contractor is paid. Some will add and pad hourly wages not accounted for. Some will low-ball the cost of the renovation, then tell you after they start that there is really more work.
Before you can even consider bidding:1. Are your finances in order; most expect a 10% down for a bid?, 2.Is your home ready to show in order to sell? 3.If you win the bid, Can you float 2 mortgages until your home sells? 4. Know that this will be one of those most stressful times in your life during a renovation. 5. No renovation finishes on time, expect to add 2 additional months and an overage of 25% to your cost.
Things to mull-over:Talk to your kids. Explain to them about the move and the changes. My then 10 year old was initially excited, but then got upset as time went on. She did not want to change her surroundings or make new friends.
Will you live in an apt while you are remodeling a foreclosed home? Will you live in the foreclosed home during renovation?
Check out the schools in the area. It's good idea to drive around during the day, afternoon and night to see what your neighbors could be like.
What are the homes selling for after renovation in that neighborhood? You don't want to put in more than the market will bear.
How will this move affect your spouse, his career, commute, his routine?
How will this benefit the family long term?
Things I wish I knew:
Do not trust the city government to file the necessary paper work for your foreclosed property on time. In fact ours was misfiled and sitting in a pile of papers waiting for a judge to signover.
Do know that they will charge you interest if your purchase monies do not close on time.
Do yourself a favor and keep detailed notes and receipts. No one cares about your home purchase more than you. My husband is super detailed.
Do make sure the title of the home is clear and free and under your name.
Do call the city government daily until your paper work is resoved. It took them 4 months to literally file and record our foreclosed home in our names. Buyer beware!
Do get everything in writing from your contractor. Everything should be broken down by the hour, then by the materials and then the actual labor.
Do make sure the contractor gets a permit with your city and if that is billed in the final bid.Some contractors do not file a permit and then your city inspector and halt the job and fine you.
Do put in your contract that you must sign off on every change. You do not want then to forge ahead and then give a you a surpise bill. Know what you are spending on materials becuase they do not care.
Do checkoff what they do or say they do. We have caught so many errors and I will tell you we also missed several. Most contractors will try to get buy with a 2" pipe even if the job requires a 3" pipe. They are hoping to skate by and hope you never discover the short cut they took.
Do take photos of the befores. It is hard to remember where floor joists are positioned and pipe runs.
Do not pay the contractor until the job is completed as written in the contract. Many will start a job and tell you he is almost done. The contractor will ask to be paid. DO NOT PAY A PENNY until the job is complete. he will have no reason to come back and finish.
Do check at minimum 3 references and ask to see the work.
Do provide a lien waiver. You have the contractor sign-off the lien waiver when the job is paid. This prevents him from filing any liens against your home if in the event he comes back to you asking for more money. The laws work in favor of the contractors not the home owners.
Things you get stuck paying that the previous owner failed to pay, this depends on where you live:
1. Any back taxes, 2. Any unpaid bills like water, sewer In our town, the water and sewer follow the house.
You are basically buying a home as is. So, if there are repairs that you are able to fix without paying out by hiring a contractor, you may have a gem. But if you are like myself and my husband, we had to pay out for all repairs because the house required electrical and plumbing updates to bring it all to code. I would recommend hiring a contractor to walk through the house before bidding if possible. A contractor can provide a guestimate of what you will need to repair. Naturally we all have different ideas about what is livable. You will need to add this cost to your bid price. It may be that you should not buy the home because the repairs far exceed the market value of the home in the area. This would be a good time to just walk away. Luckily for us, the home in the area we purchased is within a price point of other homes that currently exist before repairs. You never want to be the most expensive house.before repairs.
Result of renovation: It has been 1 1/2 years and we still have things to repair. This summer we replaced the entire roof, fixing side-porch and replacing 37 windows. Our project next year will be the front facade.
Benefits: Our location, the neighbors and proximity to shopping and Lake Erie. My one daughter is finally coming around and is making great friends. As for my middle school daughter, she loves the fact that we moved because she has made a lot of friends. The schools are number 2 in the state. As for my husband, I am happy he is settled. It took while for him to find a gym and get used to a much longer commute. It really stinks when it's winter. He does bike and run more because we are near a metro park and blocks from Lake Erie.