The idea of getting a foreclosure property for an absolutely incredible price might seem like a dream come true. The emphasis should be on the word “dream!” There are some deals, but along with the occasional dream there are also potential and real nightmares. May I offer a few observations based on what I see as a working real estate agent.
First, there are some great deals out there, but an informed buyer needs awareness.
Our area has seen a huge increase in foreclosed properties. These are properties that a bank owns as a result of foreclosure. Some are good deals, and some of these are horrific deals! Why?
Let start with the fundamentals. Condition of the properties varies – from just needing new carpet, paint and appliances to…and I saw this just the other day…having mold covering the basement walls!
Buyers buy these properties “AS IS.” You can usually negotiate having a home inspection done and then you would say “yes” or “no” to the property. The bank will not fix anything.
Also in the category of “games the bank likes to play” is the bank’s authorization of their real estate agent to not tell a buyer or the Buyer’s Agent if there are other offers on the property. So you are going in on the blind side.
Many times they have several offers – so they advise you to make your “highest and best” offer. At this point the buyer is competing for a property – thus usually having to pay more than the low list price, in order to have a shot at getting the property. When you first saw the property the price seemed good, but now in order to compete you will have to raise your offer. Now the deal is not quite as good. In fact, it may be a mediocre deal at best….considering you will have repairs and maybe some surprise repairs after settlement. Then again is may go from a mediocre deal to one you should have avoided..a flat out bad deal.
A few other kickers in the mix include the possibility that if the property condition is on the bleak side, it’s hard to get FHA or VA financing
You know that old saying, “If it were easy, everyone would be doing it.” It applies here.
On the other hand, I am not suggesting that among the slice of available properties that are foreclosures there aren’t some good deals, and some great deals. But there are cautions and red flags that an informed investor or consumer needs to know about. It is important to know the hazards, be prepared to act quickly, and be ready to deal with the fix-up issues that are common. If you go in with a realty-based awareness that foreclosure deals run the spectrum from good to bad, and you are prepared to do a few things decisively and smartly, then obtaining a good deal is doable. Let me run those down again, because you don’t want to get hurt on something that is supposed to help you.
• Know the hazards as well as the opportunities
• Be ready to move decisively
• Expect fix-up issues
If you can successfully live with the mix of “hassle” factors, there are opportunities. Typically, the bank will respond within a week or so of your initial offer.This is a HUD site where you can view HUD properties that are foreclosures: http://www.hud.gov/homes/homesforsale.cfm
Also, here is the link to the HUD “Avoid Foreclosure” page : http://www.hud.gov/foreclosure/index.cfm
If you’d like me to send you a few more educational resources on foreclosures, or if you have questions about a specific property, or if you would just like to discuss where to start in this whole foreclose area, of course, just let me know.