A lot of people remember seeing foreclosures during the 2008 crash (or at least hearing about them).
Dreams of scooping a home from the auction for $20,000 still run around in their head like a child at a trampoline park.
And while these sales DID exist. I believe most people are not understanding the full story behind these homes.
I was there, actively involved in investing at the time. Let me refresh your memory.
A LOT OF THESE HOMES WERE IN HARD PARTS OF DETROIT
I met the love of my life in a Detroit neighborhood known as Warrendale. (Warren & Archdale area.)
If you’ve been around awhile that intersection rings a bell because it was the site of the infamous bus shooting injuring 7 children ⬇️
https://www.theoaklandpress.com/2010/07/19/teen-charged-with-shooting-7-students-at-bus-stop/
Warrendale was wrought with gang activity, drug trafficking, and reckless behavior.
Which is fine if you’re searching for distressed properties to rent out to Section 8 housing (which several did).
But to raise a family…..that’s a call you’d have to make.
(As my real estate license prohibits me from making a judgement call on whether or not gang-ridden neighborhoods are suitable for families. 😏 )
YOU BETTER COME WITH CASH
The far majority of these foreclosures are cash sales.
Meaning, you attend the auction…win the bid…and pay in full immediately.
Do not pass go, do not collect $200.
BUT YOU MAY STILL NOT OWN IT YET
“What do you mean? I just paid cash for this house.” 🗣️
True. But if it’s a sheriff sale auction…..the owner of the house still has redemption rights according to the law.
Meaning they have 6 months to either come up with the funds to buy the home back at the auctioned price.
OR….the more likely scenario….they trash the joint, sell everything they can out of it (water tanks, baseboard, copper wire, etc) and live rent free for 6 more months.
So your “steal” of a property just cost an additional $40,0000 to be made liveable.
Congrats! You're a homeowner!
YOU’RE A REALTOR. YOU HAVE A BIASED STANCE ON THIS TOPIC.
Unfortunately they haven’t created an emoji with an eye-roll hard enough for my response to that.
I couldn’t care less when you buy a home.
If you want to rent a 2 bedroom apartment for 1500/month with 5% increases yearly…..be my guest!
I’m simply sharing my experience from being IN the trenches.
And yes, while I make a commission from any real estate I sell….that doesn’t make me unqualified to give advice.
When you hire a lawyer…..are you looking for the guy who does it for a living?
Or your neighbor Eddy who watches Law & Order every night and has a couple extra hours throughout the week?
Same concept.
SO WHAT ARE YOU SAYING? THERE’S NOT GOING TO BE ANY DEALS?
No, not exactly……but waiting for a move-in-ready home for less than you can currently buy vacant land has no basis in realty.
And if you DO find a property for $20,000…..it’s highly likely it will need demolished (to the cost of $10-15k)….before re-building.
WHAT DO YOU ADVISE?
Simple.
Start small. Don't put yourself in a bad spot.
Prices on homes ARE up from 5 years ago….and 5 years before then…..and 5 years before then….(see where I’m going with this?).
The prices are a result of inflation, not some mass market manipulation.
Let your BUDGET dictate the size of house you need. Not HGTV!
Follow the 25-30% rule.
If you’re brining home $5,000/month, the MOST you should be paying for a mortgage is $1,500/month (principle, interest, taxes, & insurance)….which is a budget of $200-225k.
That will get you a modest home to hang your hat on.
Let that property build equity for you over the next 5-10 years then flip UP from there.
Rooting for you,
David Fox
C: 734-679-0174