Why Should/Shouldn't I buy an Alabama Occupied Foreclosure?

Question

Hello Alabama Community, I'm not new to buying foreclosures in Georgia. I have children that recently moved to Alabama. I am considering buying at foreclosure auction. I've been reading as much as I can. My main question is this: Have any of you bought occupied foreclosures? By the time I make my bid at auction in GA the properties are vacant. In Alabama I understand it is common for the foreclosed property to be occupied, the investor must evict (evict may not be the correct terminology) the occupant, and if tenant occupied could be responsible to make a tenant whole. Another concern is increased property damage if I pssssss off the occupying foreclosed party/tenant.

Would you, OR wouldn't you, buy an occupied property in Alabama? Why? Many Thanks ! ! !

Appreciate Y'all

Would you, OR wouldn't you, buy an occupied property in Alabama? Why? Many Thanks ! ! !

Appreciate Y'all

Randall Alan · Answer

@June Crile

While redemption is always a possibility... my experience has been that if a property made it to foreclosure, the person being foreclosed upon has had PLENTY of opportunity to redeem the property already.  On the ones I did, both parties had pretty much just 'quit dealing with life' to put it  mildly.  Both were people in life situations where they just saw no way to solve their problems and they more or less stuck their head in the sand and said "what will happen will happen".  One was divorced and just didn't understand how life worked... had quit her job and just had no way to pay.  The other had their spouse die, was in poor health, hated the government and seemed to just be ok with riding out the foreclosure knowing that "that day" will come some time.  Interestingly, the second person started renting from us and actually passed away in the house 6 months after we took it over.  Which is a whole other story! Point being - I think redemption is really rare... and if they do redeem the property you obviously get the vast majority of your money back.  In Florida the fee to the county isn't refundable (believe it or not!) - I think because a 3rd party vendor runs the auctions and still gets paid so the investor is at risk - but only for a small percentage.  I have also had a sale go through, just to find out that the person filed for bankruptcy either the same day, or the day before and the court was unaware, so they voided the sale after the fact.

Fun fun!

Randy

Denise Evans · Answer

1. How do I identify short sales to go after? I don't have a formula or a plan. I look over the opportunities and evaluate. Every deal is different.

2. Redemptions--rarely does a borrower redeem. More often, not very common, is someone who purchases the borrower's rights and redeems. Often, the numbers don't work for that strategy because there are other liens against the property that are reinstated if there is a redemption.

Sadly, it is not uncommon for someone to buy the borrower's redemption rights, threaten to redeem, and then extort money from the current owner to just go away. That is why it is important to know what the redemption charges are, which includes the amount by which the property value has been increased due to the current owner's post-foreclosure permanent improvements and/or repairs.  Investors should always take immediate steps to make it too expensive to redeem.  There are other strategies to make it too expensive to redeem, or if someone DOES redeem, the investor does not care because it is making a killing in profits.

Randall Alan · Answer

I look at occupied properties as the possibility that you have an instant cash-flowing property with little to no initial rehab. The tenant has already accepted the property in the condition its in.

We have encountered this a couple of times (albeit in Florida). Each time we went to the existing tenant and advised that we are the new owners of the property and they could either continue to rent it from us for $X / month, or they would need to vacate the property. If they didn’t we would have to evict them.

Both times the tenant continued to rent from us while we did various external fixes to the property. Obviously it just depends on how it all comes together and your plans for rehab, etc. Eventually they left the property and then we did the interior rehab and flipped the property.
One other thing… if it is the old owner occupying the property (the case in both the ones we did), we helped them collect the excess funds paid in the auction (over all the foreclosure costs). They are entitled to those funds… each if our new tenants got $30-40,000 - which made it really easy for them to pay us rent for a year or two. If you are saying “Wait, what ?”… the auction closed for $125,000, but the bank foreclosure only totaled about $78,000 that the tenant owed to the bank / court. The difference between those two figures is the previous owner’s funds. (They typically have no idea!) They just have to apply to the court and follow a simple procedure to claim it.

Be aware that the condition of the house might be really bad. One of ours, the guy had 10 cats and never emptied the litter boxes. The whole place smelled like cat urine… even after removing all carpeting, etc. so buyer beware… anticipate surprises!

all the best!

Randy

June Crile · Answer

Hello Parker, There is not a list as far As I know. Have you looked at AlabamaPublicNotices. Com? You can filter your search to include only the county(ies) you are Interested in. I wish there was a list for each state that could be filtered to the counties I’m interested in containing owner nane(s), address, year bought, loan amount, deed book/page, attorney Information, etc. I would be a happy subscriber. Best of luck

Parker Blaylock · Answer

I didn't want to make a brand new thread, and thought it might be a relevant question for this one.

Is there a schedule for foreclosure auctions for Jefferson County?  And what properties will be at that auction.

I've been googling for the last hour trying to find out and feel like an idiot.  I see on auction.com where properties have listed dates to go to auction, not sure if that's how you are supposed to do it and if all the foreclosures are captured on the site.  Appreciate any help!

June Crile · Answer

I've had the same bankruptcy problem. It took 3 MONTHS, and a letter from my Real Estate Attorney to finally get my money back from the legal firm that conducted the foreclosure. What a nightmare!

June Crile · Answer

Hello Denise, I have a question I hope you don't mind helping me think through.

If an owner of a pre-foreclosure and I reach an agreement and I buy the property before the foreclosure sale, the seller/distressed owner transfers by warranty deed or quit claim deed and I record the deed. I am not paying off the mortgage, I know that violates the due on sale clause in the security deed. When I say buy, I pay the owner any agreed upon amount to transfer the property to me. The property is a desirable property, at auction it is bought for more than payoff (and more than I paid the owner) so there is excess funds the foreclosed upon party is entitled to. In your opinion, do you think I am legally entitled to file for and receive the excess funds? I have concerns that because I did not sign the Security Deed/lien, and the foreclosure was not conducted against me that I may not legally be entitled the excess funds.

Please share your thoughts.

June Crile · Answer

Hello Denise, I have a question I think you can answer. I hope you don't mind helping me think this through.

If an owner of a pre-foreclosure and I reach an agreement and I buy the property before the foreclosure sale, the seller/distressed owner transfers by warranty deed or quit claim deed and I record the deed. I am not paying off the mortgage, I know that violates the due on sale clause in the security deed. When I say buy, I pay the owner any agreed upon amount to transfer the property to me. The property is a desirable property, at auction it is bought for $70,000 more than payoff, so there is an overage that the owner is entitled to. In your opinion, do you think I am legally entitled to file for and receive the excess funds of $70,000?

June Crile · Answer

I agree with Denise about not C or lower.  I personally have no experience with working with a lender on a short sale. My purchases have been on the courthouse steps, or by contacting the homeowner prior to the sale. I don't buy into sob stories and can usually tell if the person I am dealing with is sincere, of course that means face to face contact. The homeowners I've dealt with had unexpected, devasting medical issues, or drug problems, a couple inherited a home from her deceased mother and they were just...no nice way to say this.... they were trash that tried to burn the house and collect on insurance, another man sold to me before going in to serve a lengthy jail sentence. One of my sellers just quit paying his mortgage when he was granted Covid forbearance, he saved what he would have spent on the mortgage and moved into his girlfriend's house right before the foreclosure; and this brick home was immaculate, great condition! Each foreclosure is different.

Denise> How do you identify the short sales you want to go after?

Denise Evans · Answer

I'm sure there are some industry statistics somewhere. There are several government agencies that track residential lending and foreclosures.

Why Should/Shouldn't I buy an Alabama Occupied Foreclosure?

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