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  1. #1
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    Aug 2009
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    Default Buying a Renovated Foreclosure

    My question involves real estate located in the State of: Alabama

    I have an offer in on a house that is being sold as a foreclosure. The guy I'm buying it from bought it at a foreclosure auction, and finished the renovations the previous owner started. Because he didn't do all the renovations, he's selling it as is. The right of redemption runs out Nov. 19th. It seems odd to me that he put in a good amount of money in renovations, but is selling it as a foreclosure. The only reason we can come up with is that he has to sell it as a foreclosure until right of redemption runs out. Does that sound like a logical reason?

    I am planning on getting extended title coverage to protect me incase there are outstanding liens from the foreclosure.

  2. #2
    Join Date
    Mar 2008
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    1,995

    Default Re: Buying a Renovated Foreclosure

    Quote Quoting JimBham
    View Post
    My question involves real estate located in the State of: Alabama

    I have an offer in on a house that is being sold as a foreclosure. The guy I'm buying it from bought it at a foreclosure auction, and finished the renovations the previous owner started. Because he didn't do all the renovations, he's selling it as is. The right of redemption runs out Nov. 19th. It seems odd to me that he put in a good amount of money in renovations, but is selling it as a foreclosure. The only reason we can come up with is that he has to sell it as a foreclosure until right of redemption runs out. Does that sound like a logical reason?

    I am planning on getting extended title coverage to protect me incase there are outstanding liens from the foreclosure.
    I took over a pre-foreclosure where the prior owner started the renovation, had most of the materials on site, and this was all included in ther purchase price to me. The price and deal appeared too good to be true.

    It was only when I got a contractor to get on with the renovation that I found out the owner started the renovation without getting any of the needed permits. It was then we decided to obtain the building plans that we found a major load bearing wall had been removed, and if a major snow storm had hit, the house would have collapsed right in the middle section.

    He tried to take a wall down to make one HUGE master suite.

    So just finishing up the renovation was not an option. We had to submit plans to get the house more in line with the original plan, with the appropriate load bearing walls in place. We did add in some additional closets while we're at it. So instead of making a major killing with a quick flip, paying the taxes, I kept it as a rental, as I was able to cash flow very well at the purchase price.

    Another issue is some localities allow owners themselves to do rehabs, but when it comes to investors, they want to see a contractor involved. This also stopped some would be "self-rehabbers" once they figure in the margin for a contractor.

    I did give some thought to selling the place to someone else when I found out about all the problems. and headaches, but I thought through it ethically, I should disclose it, and that would drastically lower my profit. I did much better finishing it up legally, and holding it.

    But I know some people know are "flippers" at heart does not have the attention span to do rehabs, and when they realize the complexity of it, quickly decide that that maybe flipping it for a small profit, then relaxing, beats doing REAL work involved in a major rehab.

    I don't know which one of these scenarios pertain to you, but at least it may help to explain what happened.

    You do have to be careful with liens, though the ones you have to worry about most are tax leins.

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