Foreclosure: Tips and Advice for Buying (or Walking Away from) a Foreclosed House
Fear and loathing in foreclosure: After falling in love with a house in foreclosure, a local couple decided to play “real estate roulette.” They lost. Or did they?
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Illustration by Leo Acadia
A week before the scheduled closing, we got word that Fannie Mae had never bothered to get the deed changed into its name after foreclosing on the house. And since deeds are kind of a big deal in home sales — you know, needing to own what you sell and all — that pushed everything back. This sort of sloppiness is apparently very common in foreclosure sales. Fannie Mae asked to extend the contract by a month to straighten things out. But like they had throughout, they stalled on getting us the paperwork, aggravating our already fraying nerves. Paranoia set in. Were they trying to back out? Had a developer or some other family come along and made a better offer? Our lawyer Joe Rones, who is a mensch, and his diligent paralegal Becca Shaw reassured us. But we were uncomfortable in the knowledge that our contract could run out without a sale.
Eventually the extension materialized, just two days before the contract was to run out, before we were supposed to close. This brought us to the unpleasant task of calling all the contractors we’d lined up to tell them we had no work for them the next week, and ask if they would please come back some other time, even though we couldn’t tell them when. A fairly tight three-month window between closing and the end of our lease on our apartment was shrinking with every passing day. But the stress, we figured, was the price of the bargain.
The tension never let up. The quiet persisted. We’d already decorated the house in our minds. Picked out toilets and tubs and tiles and paints. We were placing imaginary furniture and matching it up with imaginary rugs. But for weeks on end we heard nothing from the seller’s side. Our realtor and lawyer pushed hard for word on the deed, for a new closing date, for anything. But they were met with silence. Now that it was time for them to deliver, after all the hoops had been jumped through, all of Fannie Mae’s urgency had dissipated.
After a few weeks of heavy snowfall, we went to take a look at how the place was weathering the winter. A puddle of water sat on the floor of the dining room, directly below the rooftop terrace in the back of the house, where the snow had accumulated. Without proper gutters and sufficient slope on the roof, the water sat and eventually made its way through the roof and wall. The plaster on the ceiling was crumbling, the siding peeling and falling away. Sitting empty and unloved, the house was beginning to rot.
We brought our contractor back and he discovered that the roof on the extension — which was made of asphalt, not slate — wasn’t laid with the requisite rubber liner below it. Nor, for that matter, was the roof intended to be used as a deck, with the joists too far apart to support the weight. (In retrospect, it had always felt a bit bouncy up there.) To fix the roof would be another $7,000 — on top of the $8,500 for the asbestos; and the $25,000 or so it would take to fix the existing bathrooms, electrical wiring, slate roof and gutters, and to add a powder room and some badly needed closet space. And that’s before we’d do anything about the cheap kitchen and its own structural issues, finish the hopeless stretch of basement that led to the fourth bedroom, or put in the $3,000-odd share we were told our new neighbors expected us to contribute for the repaving of the private road that acted as a common driveway for the cluster of houses behind ours.
But confronted with our request that the purchase price be dropped another $7,000 and that the closing not be delayed further, Fannie Mae answered... nothing. They never said a word. Total radio silence. The only person who would offer any kind of response was the selling broker’s administrative assistant, who acted like a bully, forever threatening to put the house back on the market if we didn’t drop our growing list of demands, born of their own sloth. Even our seasoned lawyer and realtor — who’d more or less seen it all — were taken aback and grew increasingly concerned that the deal would never get done. We called the county clerk several times, and no request to change a deed was ever filed.
After paranoia came insomnia. The days ticked by in silence. Everybody we talked to advised us to walk away. We’d gotten mired in a bad, one-sided relationship. Our partner in it was elusive, and possibly unattainable. This union, if it ever came to that, was going to strain our psyche — and possibly our marriage — for at least a decade. There was that much to do. We gave Fannie Mae an ultimatum. We demanded that the $7,000 be taken off the purchase price and that we’d close in time. No answer. So we steeled ourselves and broke up with our dream house. We walked away crushed, taking $5,000 in losses. The appraisal; the rate lock; the architect; the de- and re-winterizing for the inspection; the inspector; the asbestos inspector; the survey; the title search. They had all added up.
We’d been right about foreclosures all along.
“This was a fairly unusual situation,” says Kaplan, who has worked in real estate for 22 years. “But it does happen. I’ve heard other horror stories where there is no signed deed at the closing. Basically, the bank just doesn’t care; there is no human emotion involved here. They don’t care if your lease is up, if you have to transfer money, if your inspection is bad. The banks are very short-staffed, and things fall through the cracks.”
So what advice does Kaplan give to those who have fallen in love with a foreclosed property? “You have to know what you are getting into; things are usually in worse condition than they appear to be. It doesn’t mean you can’t get a good deal on a great house; but if you want a quick closing, don’t go with a distressed property.”
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