The time between when I first saw my future house (from the outside only) to the time the final bid had to be placed through the online auction at gohoming.com was approximately five hours. Five hours does not give a girl a lot of time to do her due diligence regarding the company selling the home, and resulted in a lot of sleepless nights of googling variations of “is gohoming.com a scam?” and “has anyone successfully bought a house through gohoming.com?” after I’d won’t the high bid.
And there wasn’t a great answer, at least not for timed-bids, which is how I won The Liberty House.
So let’s start with the basics. It’s not a scam… it’s a legitimate business, but there’s some risk involved in the auction process, and it’s also a giant pain in the ass. In my case, it was well worth the pain to end up with my dream house, but I think it’s important to go into the process with realistic expectations of the time, due-diligence, paperwork, and risk that goes into buying a property through this company. (Or really, any foreclosure or auction property.)
From what I can tell the “parent” company Altisource Portfolio Solutions (ASPS) goes around and buys up bank-owned properties around the US. Those properties are then listed on one of their sites (altisourcehomes.com or gohoming.com). When the properties are sold, they are filtered through a Sellers Agent (who is probably out-of-state) and they also own a title company, Premium Title, for closing (which is also probably out-of-state, unless you’re in Atlanta, GA.) Also: see my note below about using your own title company, which I strongly recommend.
Here’s a list of the related companies:
- AltisourceHomes: National brokerage for the listing and sale of REO properties.
- GoHoming: Online real estate marketplace utilizing both timed and untimed bidding to sell REO properties.
- Lenders One: National alliance of mortgage bankers, correspondent lenders and suppliers of mortgage services.
- Nationwide Credit, Inc.: Asset recovery and customer relationship management solutions.
- REALRemit: Patented electronic invoicing and payment system that maximizes efficiencies and optimizes cash flow.
- Premium Title: Distinguishes itself through responsiveness, convenience and superior service delivery.
What you need to understand is that this is a legitimate business model in the sense that you can actually purchase a house through them. There have been some reviews/complaints online about possible fake bids, etc. I can’t speak to that, but I can tell you that I chose to “autobid” by setting a high limit, and the final bid I won with was $15,000 less than my high limit. If they were scamming I think they might have tried to drive it up higher.
Regardless, when you bid on and purchase a house through this company, it’s a largely automated process. It means if you’re a first-time home-buyer you need to be really familiar with how the home-buying process works, because (despite being assigned a “transaction coordinator”) there’s no one to ask questions to or to guide you through the process. My advice is to know the process, and don’t trust that anyone (Realtors, loan officers, title company agents, or transaction coordinators) knows what they are talking about. In more than one instance in my experience if I had just blindly listened to the transaction coordinator, it would have been a mess, and everyone else who worked with me– while they were all great– were very up-front about the fact that this process was different from most other property transactions.
That being said, in the end I did end up with a house. I paid a bit more in fees than I would have with a traditional sale or REO sale, but I also got the house for significantly less than its appraised value. And all it cost me was lot of work, due-diligence, sleepless nights, and seventeen new gray hairs.
As far as I can tell it works like this: A house is listed for a very short dollar amount for a very short period of time. You can probably take a look at the house before you bid on it (and wouldn’t that be a good idea?) but you have to catch it quick. I found my house on Zillow the last day of the bid and wasn’t able to take a look inside beforehand, but I did make a rule that I wouldn’t bid any higher than I thought the value of land and outbuildings was worth, just in case the house was crap and needed to be torn down.
Even though I’m a staunch DIYer, you should have your own Realtor for this. If you can find one that has gone through the process with Altisource or GoHoming.com before, even better. My house had a lock-box on it and my realtor was able to get the code off the MLS so that we could do a walk-through. In this case it was after I won the bid on the house, but you know, I like to live on the edge.
There are two different ways houses are listed on the GoHoming.com site. A timed bit is basically like the eBay of house-buying. A time limit is set along with a reserve, and you can bid up until the time limit, or within 15 minutes of the last bid after the time limit has ended.
- Registering – Registering was quick and easy, and they didn’t ask for any crazy information like a credit card number, and they don’t spam you with any emails or offers after the fact.
- Bidding – You can either manually bid or set the system to auto-bid (which means if anyone out-bids you the system will automatically increase the increments by $1000 over the highest bid until your high limit is hit.) There are two nice things about auto-bidding. One of them is that when it came close to the end of the bid time on my house, the website kept stalling and I would get an error on the page that wouldn’t let me get in and bid, which put my blood pressure through the roof. The other thing is that there are 3 screens worth of info you have to fill out each time you bid, but if you auto-bid you only have to do it once. When you are outbid the system does send you an email, but when it gets down to the wire those emails don’t come fast enough.
- Bidding information– When you place a bid the system asks you to fill out information that will later be used to populate the purchase agreement (if you win.) This information includes whether or not you want to use their title company (don’t), if you plan to finance the property, etc. Don’t just choose anything to fill in the blank here because if you win and it becomes part of the Purchase Agreement, you’re locked into the terms.
- Winning (or Losing) – The auction doesn’t actually close at the designated time unless there has been a 15 minute period without any new bids. This lasted an extra hour for me and was incredibly nerve-wracking. So be prepared. If you win, you’ll be sent the Purchase agreement in an email within 30-40 minutes.
The Purchase Agreement
The purchase agreement is basically a form agreement that refers back to an information page (page 2) that has all of the options set by the “seller” or by you through the bidding process. There are also a lot of fun clauses that absolve the seller of basically anything that could go wrong in the closing process.
Some of the highlights:
- Deadlines – The Purchase Agreement must be signed within 48 hours. We heard from the sellers agent that because the process is automated, if you don’t get your paperwork back in on time, the house will automatically go back “on the market” in another auction and you’ll lose your bid. Luckily you won’t have signed the contract or sent in the earnest money deposit, so you probably won’t lose any money either.
- No Loan Contingency – Be prepared to pay cash, or lose your deposit (5% of purchase price) in the event that you can’t secure a loan, and let me tell you this… It is very difficult to secure a loan for a previously bank-owned property, especially within 30 days of having a signed purchase agreement. I did it, but I got lucky on the shape the house was in and I still had to clear a lot of red tape.
- Closing Date – The purchase agreement will specify a “must close by” date. If you don’t close by that date because of something on your end, they will charge you a $300 fee for missing the closing date, plus $150 per day for every day until you close. If you don’t close on that date and it’s their fault you don’t have to pay anything, but neither do they.
- Earnest Money – 5% of the purchase price must be put down as a deposit (in the form of a cashier’s check) when the Purchase Agreement is signed. This check should be made out to the title company you are using (either theirs or your own). Again, I recommend using your own local title agency for a number of reasons, not the least of which is that I did read some reviews that said it was difficult to get the deposit back from the GoHoming title agency (Premium Title) when a deal fell through. Also, in my case I had to escrow some additional money for updates to the house (courtesy of the bank and appraiser) and I would only want to do that with a local company.
- Liability – The clause that probably gave me the most anxiety was the part that said basically, “You’re agreeing to pay this price and if something happens to the house (like someone breaks in and steals all the copper pipes) between now and closing, sorry! Not our problem.” And the day after I signed that I went to the house and someone had been inside and left their work gloves and flashlight in there. Not to mention the siding and copper pipe that had been clearly torn off of the garage and propane tank. I asked the Sellers agent if there was any way to “protect” the property until closing–either by changing the lock box code, not allowing other agents on the property, etc.–which they would not agree to (and why would they as it was my ass on the line, right?). They did let us put a “sold” sign in the yard prior to closing, however. Above and beyond that, let’s just say I’m resourceful and found ways to make sure the house was protected prior to closing, and I’m sure that if I hadn’t done that I would have found a lot less copper plumbing in here by the time I moved in.
I’m not even remotely an expert on securing a home loan and the process is so convoluted that even in my limited experience I could write volumes about it. If you’re not crazy and haven’t bought 3 houses in 7 years (or haven’t bought one since the bubble burst and all the banks stopped having the freedom to use common sense when giving out home loans) here are some things you should know. The general process works (or should work) like this:
- Pre-approval – You can usually do this online. It definitely requires a credit check and information on your salary, banking history, financial stability, etc.
- Starting the Approval Process – You can’t start the actual approval process until you have a signed purchase agreement. Once you do you may need some additional documentation (for me it was complete tax returns). As part of this process you’ll be asked to sign a ton of different disclosure documents, one of which is a Truth in Lending Statement. Pay close attention to this one because if they screw it up (and my bank did by not reading the Purchase Agreement thoroughly enough and failing to include the Title Transfer Tax amount) and you don’t find out until the last minute, it could potentially push your closing back. And if you’re down to the wire, that– in turn– can cause closing delay fees with the seller.
- Appraisal– The property will need to be appraised, and there are a host of things that can go wrong at this stage in the process. The value of the house may not be high enough to get approval for the loan amount you need, there may not be enough “comps” (sales of comparable value in the area) to get a good estimate from, you may need an additional appraisal, etc. You may also need to factor in (as I did) paying to have the house dewinterized and rewinterized because all major utilities will need to be on for the appraisal to go through. I’ve had issues with appraisal on every single purchase or sale of a piece of property in the last three years, and frankly, even though I bought The Liberty house for significantly under the appraised value and put another big chunk of change down on the loan, it’s still a small miracle that this all worked out.
- Approval by Underwriting – Once the bank has all of your paperwork and the appraisal (which will usually make it to the bank within three business days of the walk-through) an underwriter basically gives the yay or nay on the loan. I actually had to provide more documentation, and a letter stating I was a licensed contractor and had the funds to make some additional small repairs to the house (which they then made me escrow the cash for) before they would approve the loan.
Closing the Sale
The 30 days between signing the purchase agreement and the closing date felt alternately like an eternity or not nearly enough time, depending on whether I was trying to defend the house from looters or cut through all the underwriting red tape. Here are a couple of things you should know:
- Check, re-check, and check again on all of the things that will need to be complete before you can close. 30 days is not a lot of time to get all of these things done. In my case it included checking to make sure the title was free and clear of liens and back-taxes (it was not, which meant another week of paperwork), getting a well and septic inspection that was required by my county, and, of course, getting all of the loan paperwork in. I made sure all of this was in the works the day after I signed the purchase agreement, and some of it was still being finalized an hour before closing.
- About working with GoHoming specifically, the paperwork needs to be in to them 48 hours before closing. My loan officer didn’t do this, which means I was sitting in the closing office with nothing to sign, had some last minute changes, and then had to go back the next day to re-sign everything. So make sure everyone knows when the paperwork should be where and that they actually get it in on time.
Hidden Costs of Buying At Auction
When you purchase a house “traditionally” (as in, not a bank-owned or auction house) there may be some items that are the sellers responsibility, such as a septic inspection or paying the transfer tax on the title. When you buy a house through GoHoming.com, it is all your responsibility. Here are some of the costs I incurred in this process above and beyond what I would typically expect when purchasing property (ie Home Inspection, Loan Application Fees, closing costs, etc):
- Using my own Title Company: $1200 (Worth. Every. Penny.)
- Well & Septic Inspection: $1500 (Included pumping out the septic since there was no permit on file for the property)
- Dewinterizing & Re-winterization: $1000 (Yeah. Still salty about this.)
- Title Transfer Tax: $800
A Little More About My Experience
While buying The Liberty House certainly wasn’t a whim (I knew for almost a year I’d be buying or building something eventually) it also happened, uh, swiftly, and I wasn’t quite mentally or physically prepared for it. Putting 5% cash down on the house with the very real possibility of losing it, along with the general anxiety of working with a Transaction Coordinator in India (who did not inspire confidence by repeatedly referring to me as “Stanley”, which is clearly not my name), and dealing with this company that I couldn’t find much information on, and a loan officer who had a slightly different definition of the term “responsive” than I did… well, let’s just say for the month of February I averaged about two hours of sleep per night.
In all those hours I wasn’t sleeping I was obsessively re-reading the purchase agreement, alternately calling the bank, my realtor, or the title company, and sticking pins into a little voodoo doll I may or may not have made of the appraiser.
It was not an easy month. There are so many places that things could have gone wrong (or simply gone unnoticed until it was too late) that I still have a sense of awe– and not a small amount of post-traumatic anxiety– that everything worked out in the end. Even with all of the bumps I went through in the process, the seller’s attorney actually commented to the agent at the title company that off the dozen sales she was processing at the moment, mine was the one that was going “smoothly”.
So would I do it again? For the Liberty House… in a heartbeat. For anything else, I’m not sure it would be worth it. What I hope is that by telling the story of my experience and sharing what I learned that someone else will be able to make the best decision about their own future home.
If you have any specific questions I can answer, leave them in the comments or send me an email. I’m always happy to help someone else find their home!