Upcoming Foreclosures

Pros/Cons of Foreclosures?

I am completely inept when it comes to real estate. Currently, I am living in an ok suburb in the metro Detroit area with my mother sister and my 3 year old daughter. I am 22. Me and my mom recently came to the understanding that it would be best for me to move out. I am not as financially stable as I wish I could be right now, relying on student loans and financial aid from college to get by. I have a few people in mind that have said that they would be OK with rooming with me and my daughter. We've all come to the decision that it would be most efficient to live on the east side of Detroit, in the actual city and not the suburbs because it is so cheap. I found a 3 bedroom flat for $500 a month, but at the same time, there's a foreclosure on the same street for $4500, and another one a few streets down for $1500. Those are NOT typos. I just want to know the pros/cons of buying a foreclosure, especially one in the city, and if it's actually worth it or if I should just rent. Property taxes are only about $2500/year. I don't plan on staying in Detroit for much longer, maybe 5 years at the most, and if I bought a house I would most likely turn it into a rental property afterwards since I doubt I would be able to actually sell the house for what it would be worth. Thanks!

Public Comments

1. Go get yourself a book on Home Buying for Dummies - not for dummies at all - very good book. You could do this if you have the cash on hand to buy. Since a mortgage company may not approve it (FHA) if the home is not in good condition. And I also think that the minimum on a mortgage loan is $50,000 (not sure). If you do this, you must get a home inspector to look at the home. Never dare skip out on this cost - about $300. One that you find - no friends of family or realtors. They will tell you if there is mold on the house, a foundation or a roof about to cave in, bad plumbing, bad electric that could start a fire, bad furnace or appliances, termites, etc. Also you will need a realty lawyer. They will checkif there are any back taxes due on the property (usually are on a foreclosure). Could be years of them. Also they will tell you if there are any liens on the home from past creditors. Rent for 6 months. Become an expert at buying foreclosed homes by reading plenty of books. Save up down payments. The market is still going down - so you don't need to rush and buy now. There will be many, many more homes to come. /
2. It would be very unwise for someone in your situation to attempt to buy a house.
3. The reason real estate prices are so low is that Detroit is a dying city. Although I've heard of some innovative approaches to the problem (e,g, urban farms), until people can earn a living there, real estate prices are not going to increase very much. For the same reasons, rental prices should have fallen proportionately. You might find that the owner of the house you're considering renting might be willing to bargain about the price. You may find that s/he would be willing to rent VERY reasonably to a responsible tenant, just for the sake of earning something (rather than nothing) from the property, and having someone there to take care of the place. Similarly, you might try asking people with the foreclosure houses about the possibility of renting. That's why I have serious doubts about whether you could rent or sell at a good price afterwards. Consider the condition of the house and the neighbourhood. If the house needs a lot of work, or the neighbourhood is not safe, the whole proposition may not be worth it. Over a few years, the benefits are obvious. My big question would be what you would do with it if you wanted to leave. It could turn into a real nuisance if you had to leave it as an abandoned house. It would be wonderful if you could be part of the urban renaissance that will happen . . . eventually!