Owners are spending to fix or fund a foreclosure

Bargain seekers are making hay while the sun of foreclosures shines for them. Broken pipes and crumbling tiles as trophies left behind by the previous occupants are not deterring them. They think that their investment and efforts in foreclosed houses is worth it.

Mount Vernon, a relatively poor city, was badly hit by the sub-prime crisis and as such there is a surfeit of foreclosed unit. Maria Andrews-David made her first purchase here – a bank owned fixer-upper. She paid $150,000 for it. She is now spending an extra $35,000 to renovate the unit and has plans to shift in coming spring. A nurse by profession she said, “I wouldn’t have been able to buy a house otherwise. Besides, I like the idea that it needs work. I get to put some of myself into it.”

Nearly 10% of the residential houses in Westchester are repossessed by the bank said Gary Leogrande of Keller Williams NY Realty. He is also the president of Westchester-Putnam Multiple Listing Service. Most of these houses are in need of repair. In many instances the angry foreclosed occupants “took out their anger on the properties” by hammering out tiles, ripping cabinets and causing other grave damages.

Scarsdale records show that out of 3,651 residential houses, one is in some stage of foreclosure last February according to RealtyTrac. In Tarrytown the proportion is one out of 2,946 units. In Mount Vernon it is one out 545 homes.

Andrew-David is depending on a loan supported by FHA named 203K. At the moment this is the most popular loan considering that the banks are in a stringent mood. Randy Herman also of Keller Williams NY Realty in White Plains said these plans are excellent for those seeking to buy and renovate foreclosed houses.

In 2009 16,665 of these 203K loans had been contracted said Jim Hunter of Wells Fargo in Columbia. It was a spike from 3,255 in 2007 and 6,562 in 2008. The popularity of the loans is driven by more foreclosures and distressed sales including short sales. Hunter opined that HUD is forecasting that more such loans would be in demand.

The loan has two versions – both with a limit of nearly $730,000. It would be used for the purchase and the repairs of units but exclusive of down payments said mortgage banker Donald Arace. The streamlined version requires a down payment of 3.5%. The loan would cover up to $35,000 made in repairs. Plenty of paperwork for these loans is not required. The conventional version stipulates the same condition about down payment but there are no restrictions about repairs. But in the latter instance the paperwork is more detailed.

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