My husband and I recently embarked on one of our biggest adventures together yet: buying a house. We planned to do it the normal way — endless house tours with a real estate agent, working with a private seller, and moving in soon after buying. But the fates had a different plan for us. We bought a foreclosure.
We’d walked by the beautiful, old house for more than a year, and had noticed it was quiet and empty. After sitting empty for three years, it finally came up at a real estate auction; we were brave enough to bid, and lucky enough to win. Over the past several months, we’ve learned a lot, and we’re still learning!
Note that I’m an historian, not a real estate agent or legal professional, but here’s a few pearls of wisdom from what I’ve learned (and what I wish I’d known)…
Know the area
This is wise, whether you’re buying a house on the private market or as a foreclosure, of course. We’d have never dared to jump into something like this without knowing the area so well, though. By living just down the street and knowing the house, we were ready when it came up on the MLS — not that we were expecting it to.
Work with an agent
Our agent got us into the house quickly, helped us find an inspector on the weekend, bid on our auction, and helped direct us toward financing options. She’d worked with investors on similar projects before, and was able to give us good direction. We would have been lost without her!
Get an inspection (if you can)
We’d have never bought a house at a private sale without an inspection, and we were lucky to be able to do one in this case. Our inspectors were able to confirm what we were seeing — we were looking at a great piece of property. It was just missing copper piping and needed all new heating and plumbing. More big projects would have made it a deal-breaker, and a few hundred dollars for the inspection was well spent.
Auctions are exciting, and terrifying
We worked with our agent to set an amount that we would not exceed, so emotions and the excitement of the auction wouldn’t get in the way. She did the bidding for us online, and maintained close contact by text and phone in the hours leading up to the auction’s end. I must have refreshed the auction page hundreds of times, and left work early because I knew I couldn’t focus on anything else. My heart leapt when I saw the time run out, and I spent a few squealy minutes on the phone with our agent before grabbing some celebratory rum.
Don’t be (too) afraid of unusual financing
Would you believe you can’t get a regular mortgage for a house that doesn’t have heating and plumbing? We ended up with a private investment loan that could be arranged quickly and included money for necessary repairs. The interest rate is higher, but it offered more flexibility. Due to the higher interest rate, we also researched an exit plan, and are planning to refinance after six months. Other options could have worked too, but this one worked best for us.
The bank is in control
We moved quickly on our financing to meet the bank’s 45 day closing deadline. And then the bank continued to push the deadline back while they finalized paperwork on their end. We weren’t able to close until four months after we won our auction. It was frustrating at first, but we became more zen about it after realizing it meant we weren’t working on the house in wintertime!
Be prepared for curveballs
They’re coming. We were shocked to find out we couldn’t get conventional homeowners’ insurance. After clearing all of the hurdles and tripping on this one, my husband was ready to can the whole deal after learning this. Fortunately, people are always willing to help you find a solution. For an investment property that no one is living in, vacant property insurance is the way to go.
Read over everything at closing
Our documents were a bit more complicated than most. We asked plenty of questions, and still missed something. Fortunately, it wasn’t as critical as the thing we did notice — my husband’s name misspelled on Every. Single. Document.
Then get to work making the place look loved, and start meeting the neighbors. Soon after closing, we dashed over to the house with mini bottles of champagne and enjoyed them while taking a tour and reveling that this beautiful 19th-century house and quarter acre of land was finally ours. We cleared the snow from the sidewalk, started spending time around the property, and immediately began meeting the neighbors. Their stories have been invaluable, and they’re as happy to talk to us as we are to them.
A few months into our ownership, we’re getting busy arranging schedules with contractors, researching the history of our house, and getting ready to paint the walls. We’ve tested and strengthened our relationship already, and we’re keeping our eyes out for the next curveball — and anxiously awaiting the first spring day where we can enjoy a well-deserved beer on the porch.