Friday, January 5, 2018 / by Susan Annis
As you gather a lot of experience in the Real Estate profession like Susan & Associates have, you start to learn common misconceptions that buyers and sellers may have. We have had several clients that will come to us and say that they want a good deal on a home and therefore only want to look at foreclosures. Viewing Foreclosure purchases as always being a better deal than the average sale is a common misconception. The market dictates whether these bank owned properties provide great value to a buyer or not.
To understand how the market dictates a foreclosure’s value it is best to put yourself in the shoes of the bank that has taken the home. If the economy is struggling, that causes more job loss, and therefore banks end up having to foreclose on more homes from struggling homeowners than they would in a thriving market. In this case there will typically be a lot of good deals on foreclosures and banks will accept lower offers because they have more on the books to liquidate and in these times values are normally already low. Keep in mind that the bank does not have any emotional attachment to these homes, so it is strictly a business. With a business mentality it is easier for a bank to look at 30 foreclosures in an area, for example, and feel the need to accept lower bids to get some of those homes off the books as opposed to having 2 or 3 foreclosed homes in an area. With only 2 or 3 homes in an area it is not overwhelming for them to allow those homes to sit until they get the price they would expect for the home.
Condition can be an issue that needs to be carefully looked at with all purchases but especially when purchasing a foreclosed home. There are stories of homes being purchased with concrete poured down plumbing pipes, wires cut and hidden so that electrical must be completely reworked, and more. Often times these things are hidden from a cursory look through the property. Repairs can be very scary and need to be considered by every foreclosure buyer, with contingency money set aside for the unknowns.
The final thing to take note on if buying a foreclosure is the length of the process and what effect that has on the stability of the home. Even if you get a foreclosure at a discounted price, as a buyer, you must budget how much you will need to bring the home back to good condition. When a bank forecloses on a home it is often several months or even over a year until before the bank has the title clear and is ready to put it on the market actively. When a home sits vacant, with no one taking care of it for an extended period, there are obviously more issues that will begin to arise with the integrity of the home.
However sometimes foreclosures can be great deals, to find which ones are, it is important to understand what to look for and what to ask. You need the experience and knowledge of a real estate professional that knows the ropes and can help you assure you are getting the deal you want. At Susan Annis & Associates we thrive on educating buyers and sellers on their real estate needs. We want our clients to have the knowledge that allows them to not only be happy with the immediate purchase of their home but to remain happy with that home for many years to come.