To most homebuyers looking to buy a foreclosed house, I offer this single tip: Don’t.
Whether you are a first-time buyer interested in something cheap or an experienced handyman looking for a fixer-upper, a foreclosure probably looks like a fascinating opportunity. It might seem like a tremendous deal compared to similar houses in the neighborhood. The bank that has failed to sell it for over a year might offer a quick deal if you can meet their criteria. You’ve heard of 3500 square foot mansions selling for five digits. Every day, the news bleats another story about falling prices and low interest rates. In a normal setting, all of these stories paint a portrait of a strong buyer’s market.
But with such a large proportion of foreclosed homes on the market, all is not normal. Foreclosed houses may not have been taken care of in a long time. In New England, a large portion of the housing stock is made up of old balloon frame models built in the 19th century. A hundred winters have ravaged the timbers and assaulted the foundations. Without regular yearly upkeep, a house in New England’s climate can quickly reduce to a pile of wood.
If you’ve ever driven the back roads of Maine or Vermont, you’ve seen the weathered, dilapidated barns slowly being reclaimed by nature. These barns were built to last, using post and beam construction, with steel-reinforced mortise-and-tenon joints, and lumber of pine and spruce that stood for centuries as trees. But as barns, without regular repair, they fail within decades.
A foreclosed house does not even have to sit empty while it crumbles. While the previous owners of a foreclosed house were fighting with the bank and struggling to keep groceries in the cupboards, what is the likelihood that they installed the lally columns in the basement, repointed the chimney or replaced the leaky pipes in the ceiling?
A buyer of a foreclosed house in New England should be more than just a handyman, or even a contractor who believes that some new drywall will do the trick. A buyer of a foreclosed house had better be ready for the following: terminated gas pipes without a cap, burst water pipes hidden in the walls, rotten sill timbers, massive termite infestations, unfinished kitchens and bathrooms, non-working heating systems, cracked foundations, mold and fungus, tax liens, crumbling retaining walls, shorted electrical circuits, load-bearing walls removed, doors and windows nailed shut, unfinished removations, broken glass and burned areas from local teens throwing parties, and possibly massive damage caused by the previous owners throwing a tantrum.
I have seen all of this when dealing with foreclosures. And that’s not even the biggest downside. Though banks have taken ownership of more and more houses through foreclosure, they have yet to figure out exactly how to sell them. Selling homes is not their business, and they are terrible at it. Bankers do not communicate in a timely manner with your agent or broker, they often demand draconian terms, they do not honor even the slightest contractual arrangements, they do not make exceptions, and they do not care about your schedule. They do not have another home to move into, but you will sweat the deal until the keys are in your hand.
That is why, to most homebuyers, I repeat: Don’t.
But if you are ready for a year or two of nightmares, can stomach the refusals and changing mood of the bankers, have a lot of extra money to spend on repairs, are not trying to flip the house quickly, have somewhere else to live while you bring the foreclosure up to livability, can take a lot of ribbing from friends, and are good with a hammer, saw, paintbrush, monkeywrench, sump pumps, roofing, siding, bricks and mortar, glazing, plaster, pipe dope, wiring, and probably fire extinguisher, then buying a foreclosure in New England might be for you.