How to work a Foreclosed Subdivision??!! - Posted by Brian, WI

Posted by JT-IN on October 18, 2002 at 19:54:08:

STIGMA Can sometimes be difficult to overcome… and this may last for years and years. The underlying damage to the mkt value of these homes may not fully recover until the root cause of the problem is resolved and the original builder/developers mtg are paid out; either through foreclosure or otherwise. So I would be very careful about investing in any of these houses for that reason. Do they seem to sell, when an owner puts one up for sale…?

I recently owned a sfh in an area that was riddled with foreclosures; mostly FHA. This was due to overappraisal when new, and sold by the builders. The massive foreclosures ruined the market and the ability for these homes to appraise for any decent amount. Fortunately I was able to sell the house for more than I paid for it, but not by much. comparitively the market value was 20% higher 3 1/2 yrs ago, when I bought it… See the trend…?

The next thing that comes to mind is this. If there are quite a few mtg’s with one lender, (this may be for a larger investor only), a substantial discount for a block of defaulted mtg’s could be tendered. If theunderlying homeowners (T/B’s) are performing, this may work out.

This type of situation may not be for the avg sfh investor… and if not, it is best to recognize that going in. Reflect this risk in any offer you are willing to make.

Just the way that I view things…


How to work a Foreclosed Subdivision??!! - Posted by Brian, WI

Posted by Brian, WI on October 18, 2002 at 18:07:04:

There is a subdivision near my house that was built about 5 years ago. The houses were sold on a rent-to-own basis, and the developer ran back to India with the money, causing just about EVERY house to be foreclosed on!

There are a number of them on the HUD web site for daily bidding, and nothing seems to be moving. These houses are priced in the $175k-$200k price range and I’m guessing comps are going to be about $15k-$25k higher on each end, but I still need to do my homework on that.

What are some ways to approach these?

About 2 months ago I tried helping one of the home “owners” by talking with their attorney, who talked with the lender, IndyMac, who said they were not interested in a $150k offer, they would rather foreclose and “TRY” to sell at market value.

The one house I went through recently just needs some paint touch-up, and minor landscaping, and is listed for $175k, for what that’s worth.

Thanks for any and all help.


Re: How to work a Foreclosed Subdivision??!! - Posted by John H.

Posted by John H. on October 18, 2002 at 20:17:43:

Brian -

Just an additional caution; it might be worth having a REALLY good inspector go through the place, one that knows the area and the flap about any constuction shortcomings. Maybe the developer was running from more than just default?