In 2004, we needed to move. We’d bought a brand new home from Choice Homes and were living to regret it. Our mortgage payments had skyrocketed due to tax and an escrow shortage. Things weren’t looking good in our neighborhood, and my husband’s work was too far away. Gas prices were rising. We were beginning to think of buying a foreclosure.
We started looking into selling our home, and finding a low-priced fixer-up foreclosed home that would better suit out budget. It wasn’t easy. Our home languished on the market, and when we finally sold it for a modest profit, the time when our son would need to go to school was looming.
We looked to find a home in Garland, where my husband worked. Nothing fit the bill. I found myself looking at cracker boxes, and flooded houses rife with mildew. Our realtor was a trooper. She took us to one home, and then another, and another. Even she got to the point where she thought we might be better off buying new. Still, we refused to throw in the towel.
When we finally found the perfect place, I knew it immediately. It was one of those foreclosed homes that looks worse than it really is. The lawn was half dead. The place was filthy. The kitchen faucet sprayed water halfway across the house when you turned it on. It was just off-putting enough to discourage people looking for their dream home, yet not so awful that we would have too much trouble fixing the place up.
We began working on our strategy to bid on this foreclosed house and win. You wouldn’t think that bidding on a foreclosed home would be that tricky. However, in the past I had bid on HUD homes and lost, more than once. I’d learned my lesson about bidding too low. I wasn’t going to make that mistake again.
We bid $95,500, which was the asking price for this three bedroom, two bath brick home with two living areas, a dining room and over 1700 square feet. This was dramatically lower than the prices we had seen for comparable houses. There was no point bidding high, but we couldn’t afford to bid low. We bid the asking price exactly. We had also decided to put $20,000 cash down. My husband had inherited the money from his uncle, and we felt that this was the best way to invest it. We sat on pins and needles waiting for an answer from the mortgage company which owned the house.
My father insisted that putting down a large amount of cash wasn’t the way to go. Dad kept on about it, telling me that I would “need that money in my mortgage.” I refused to listen. We needed to use that money to save us money. We couldn’t keep on paying PMI and high interest rates. They would bankrupt us before long.
It seemed that our competition for this foreclosed home consisted entirely of investors. After what seemed like an eternity, the owner of the home got back to us. They had accepted our offer. When we asked our realtor what had influenced them in our favor, she said it was the fact that we were putting cash down. The mortgage company gets their money faster when they get a cash payment. Processing the loan can take weeks.
So it’s not always a good idea to listen to the advice of family and friends when you’re purchasing a home, foreclosed or otherwise. Even if they are older and more experienced than you, they often don’t know what they’re talking about. We’re living in a very different climate than my father did, when he was buying the house he lives in now. And we’ve never been rich, like him, either. This money was all we had. When it was gone, there would be no replacing it.
It’s also a good idea to know who your competition is and understand their motivation for bidding on the home. For example, in my case, I knew that my investor competitors were not going to bid high. They weren’t attached to the house as a potential place to live. They were looking for a cheap investment. They lurched in like vultures when they saw this one, because it was a good house, and the asking price was low. I didn’t know what my competition was bidding, but since the asking price was so low, I knew that they were very likely bidding what the owner wanted.
For me, in this situation, acting on my own personal experience was the best way to go. My mortgage payments are minuscule. I don’t pay PMI. And my family absolutely loves this place. It’s truly become our “Home, Sweet Home.”
