Time and time again, I have people calling me or emailing me about foreclosed homes. I reply to alot of posts on trulia.com, where home buyers and sellers can ask questions about real estate and I find alot of people asking about foreclosures. So what's all the hub-bub about anyhow? Are foreclosed homes a good buy or not?
I'll provide an example. In Deer Park, there is a very nice colonial, priced at $319,000. It is a foreclosure, which means that it is bank-owned. Please note that a foreclosure is an "as-is" sale, where the bank is making no representations and is not going to do anything to rectify any problems with the property, whatsoever.
Now this nice colonial for $319,000 compares with other colonials in the area and they are priced in the upper $380,000 to $450,000. That's a big difference.
But let's take a closer look. This is where I like to really help potential buyers get the full picture. Now, at $319,000, this house, without getting into too many details, needs about $40,000 worth of work...that we can see. This doesn't include any c/o (certificate of occupancy) issues or unseen problems with plumbing or heating systems.
If the asking price is $319,000 and we assume that we can purchase the property at $300,000, with the additional $40,000, plus another $15,000 just to be safe, this would put the total cost at $355,000. Since we assumed a $19,000 negotiable range on this foreclosure, lets apply that to a "normal" house for sale at $380,000. So a "normal" colonial, with only minor updates needed, would cost $361,000, assuming the negotiable price range of $19,000 (same as the foreclosure).
That's a difference of $6000.
I am not trying to discourage any buyers from considering a foreclosure purchase. Not at all. However, the majority of foreclosure listings are still priced along with the rest of the market. When all is said and done, a foreclosure may not be any different from your average regular listing.
A number of issues should be understood by any buyer who considers purchasing a foreclosed property. Should you have any questions, please feel free to leave a comment or contact me directly at 631.831.9048.
(c) Copyright, 2009 www.tommcgiveron.com
By Thomas McGiveron, Licensed Salesperson
I couldn't agree with you more. Many times the foreclosed home will have hidden hazards one can't even see or detect. Many times the services have been cut off to such houses, so one has to guess as to whether the lights even turn on. People always want a bargain, but one should look at the overall cost. That money you save on the purchase can be eaten up in a hurry on repairs, not to mention the time or frustration of making them.
Well I just bought this - we'll see if it works out - foreclosureshortsales
You make a very good point and one reason is the banks are not selling (or rarely are) for 20 cents on the dollar. They will dig their heels in and base it on the appraised REO value that is reconciled with the BPOs. After that you are doing good to get another 10% off their asking price. Ironically, they will leave the price alone for months then take it away from one listing agent -who has been repeatedly telling them they need to drop the price. Then they give it to another listing agent at a reduced price and it then sells immediately. Go figure. Meanwhile, potential buyers offer half the asking price and wonder why it doesn't fly. When the price is competitive with fair market listings I always try to steer my buyer to the non REO sales.
Happy Closings :)
I agree. Funny thing is - people think that an reo offers so much in terms of a "deal".
Usually - it's just not there.
It's a site I threw together - but some good links for investing in foreclosures
http://www.tomsresource.com/foreclosures/