Should You Buy A Foreclosed Home?

In 2000, before the housing market took off like a rocket here in Florida, my husband and I bought our first house together. It happened to be a foreclosed home that had been sitting empty for months. The price was a bargain — or so we thought!

My hubby happens to be pretty handy with a hammer and paintbrush but it still took him about six weeks of full-time repairs to get the house to the condition where we were ready to move in. (The glossy black wet bar and spiral staircase with orange carpet in the living room were just a few things that had to go!)

That was just the beginning. Since moving in we’ve replaced just about everything in the home including the central heating and a/c unit, roof, pool pump and more. And we’re still not completely finished.

I’m describing this because today HUD announced it is going to help “bring stability to home values and accelerate the sale of vacant properties” by waiving the normal 90-day waiting period required for FHA financing on vacant foreclosed properties.

“A glut of foreclosed and abandoned homes harms neighborhoods, frustrates homebuyers and delays a community’s recovery,” said Brian D. Montgomery, Assistant Secretary of Housing-Federal Housing Commissioner. “The action we take today will allow homebuyers to purchase these homes in much greater numbers and ease the excess supply of unsold homes in neighborhoods across the country.”

Here’s why I don’t buy this spin:

1. These vacant foreclosed properties must be purchased by owner-occupants who can qualify for FHA financing. But since many current homeowners cannot sell the homes they live in (which is one reason why so many have been foreclosed upon), the prospective borrowers by and large will have to be first-time homeowners. How many first-time homeowners who couldn’t buy over the past five years are now in a position to buy a foreclosed home with all the headaches of deferred maintenance and unforeseen problems? Experienced investors are usually in a much better position to deal with the reality of foreclosure sales, and this proposal isn’t aimed at them.

2. How does selling a home at a bargain basement foreclosure price help stabilize prices? Wouldn’t preventing more foreclosures do a better job at that? There are still plenty of would-be buyers waiting to see “how low they will go” before they will buy.

Sure, this may be a great time for some first-time homeowners to find affordable homes, but I hope HUD doesn’t believe its spin here. And I hope this isn’t touted as another way the government is “helping homeowners in this time of housing crisis.”

But I didn’t use FHA financing to buy my foreclosed home, so what do I know?