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First Time Home Buyers...Are You Sure a HUD or Foreclosed Home is What You Really Want??

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I have many people coming up and asking me about how things are going for me in real estate these days. Most of them are concerned, for they find it hard to believe anyone can survive in this volatile market. Many of them are just interested in learning any information they can about real estate or how our market is doing, which of course I am always happy to talk about.

But most ask me the same question...so...”Are you selling a lot of HUD and Foreclosure homes to your Buyers?? ”My response to this question is surprising even to me, “No, I am not selling a lot of HUD or foreclosed homes. “ (And believe me it is not for lack of showing them!) But how can this be??

Nearly every time I begin working with a new Buyer they request the same thing...”I am really looking for a HUD or Foreclosed home that I can get a good deal on and fix up.” They all see the media where they hear of Buyers finding their dream home for cents on the dollar, which even appear to be in quite good condition. What they don’t yet realize is that although this can and does happen it is most often the exception not the norm...until they begin looking that is.

Confused Once we begin our viewing of these homes they start to see the sad and true reality of what the HUD and Foreclosure market really is. The vast majority of these homes are in great distress that will require many $1000.00’s of dollars and hours of hard work to bring them back to a livable condition. Once they take all this into consideration the bubble bursts! Their home buyer vision seems to shift and the request comes...”Can we take a look at some homes that are not HUDS or Foreclosures?”

Just as an example: I was recently showing a distressed home to a Buyer and when we began to walk into one of the kids bedrooms it smelled STRONGLY OF URINE! My Buyer didn’t even make it into the room and walked immediately right out of the house. He was done. When I contacted the listing agent to let her know what had occurred her response was, “Oh, I know...one of the older kids is a bed wetter and it’s JUST the mattress!” Now maybe I’m expecting a little too much, but personally, I would get that mattress OUT OF THERE. Distressed homes are difficult enough to sell but this could have quite easily been taken care of.

It is now when the Buyers notice that even though our market is loaded with HUD and Foreclosed homes there is also a good selection of homes available for sale that are not...and priced very well. Often when comparing these ”normal sale” homes (if there is such a thing as a normal sale these days) to the HUDS and Foreclosures, then taking into consideration the money, time and resources they will require just getting into to the home, it becomes quite overwhelming , the HUD and Foreclosed homes seem to just fall by the wayside.

Now, I am not saying there are not good deals out there in the HUD and Foreclosure Market only that it takes Piggy Bank someone with a strong motivation, the time, the talent and the financial resources to take on these homes and many of our First Time Home Buyers are finding they are either not willing or capable of doing this ....and their vision shifts.

If you are a First Time Home Buyer is a HUD or Foreclosed Home is What You Really Want? You may just surprise yourself so be sure to keep your options open.

-Therese is Selling and Marketing Properties in the Greater Grand Rapids, MI Area while specializing in Jenison, Grandville and Hudsonville. Please contact Therese directly at 616.780.0786 or by e-mail: tvmhomes@sbcglobal.net In this Challenging Market Every Advantage is Important! COPY RIGHT 2009 Therese VanderMeer All Rights Reserved.

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All content is original, courtesy of Therese VanderMeer - Realtor - FlexIt Realty

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Therese is selling and marketing properties in the Greater Grand Rapids, MI Area and surrounding communities while specializing in Jenison, Hudsonville and Grandville.

Contact Therese directly at 616-780-0786 or by email at tvmhomes@sbcglobal.net

Happy to be Providing Buyers and Sellers a Higher Standard of Personalized Service

Posted by Therese VanderMeer - Realtor - FlexIt Realty on 09/12/2009 06:21 PM

Comments (115)

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115 Comments on First Time Home Buyers...Are You Sure a HUD or Foreclosed Home is What You Really Want??

SEP

2009

Therese, what a great post! I have had the SAME type of thing happen quite a few times! And now that the tax credit deadline is looming, these homes are really out of the question, unless the buyers want to gamble on possibly not getting that $8000!!!!

Buyers, especially first time buyers, don't understand that "normal" home sellers have to price their homes competitively to foreclosed homes in order to sell. I find the same thing, the foreclosed homes are comparably priced but in need of substantial work where as the "normal" home is in move in condition.

Therese,

I have found the same thing in my market! Many first-time home buyers start the process giddy with the "great deal" they are going to get on a foreclosure, short sale or REO. Then it's like watching the air leak out of the balloon until they are totally deflated. I don't mind educating these buyers on the market, but it IS time consuming showing all those homes! Nice post!

We have so few "normal" sales in our market in a certain price range that there is often little choice but distressed homes.

Hi Therese ~ I guess we're lucky in Iowa City and I don't get to show too many foreclosures. When I do though, you're absolutely right, it's the same reaction every time - No way!! When we say distressed homes buyers really don't understand just how "distressed" that is and are invariably shocked. I even had someone very handy and looking for a fixer upper shaking his head and saying the same thing earlier this year...

Denise

Therese, I get many buyers that begin by looking at HUD and foreclosed homes. But as they start their search many find that there is more work than they bargained for. Or they find that the type of financing they are using will narrow their search on these properties down quite a bit, as the homes won't qualify.

Hi Marney, You are exactly right regarding the tax deadline approaching...our banks are already overwhelmed. Can you imangine all of the last minute attempts at purchasing these homes and what these Buyers may be in for? It's scary and looming ahead.....

its because they watch too much tv, or their friend expert at work gives them expert advice

Hi France and Mark,

With our Buyers absorbing all of the unrealistic media information regarding these homes it is truly no surprise that they do not have a clearer understanding when it comes to distressed properties. I am fortunate that with the Buyers I have worked with I have not had to go out with them more than once or twice before the request to see homes that are not HUD or Foreclosures is requested.

Hi Melissa, Our Buyers are always excited when they begin the process and it can be a little bit of a bumpy transition going from the distressed homes to ones that are not however; once they see how much home they can get for approximately the same amount of money, that they can pretty much move right into...the smiles come back! Thanks for stopping by!

Hi Christine, That certainly makes things much more difficult! I do have to say that we must keep on top of the newer "normal sales" as they come on the market and the Buyers need to be ready and willing to move quite fast or the opportunity will pass them by.

Hi Denise, You are lucky!! Do you realize just how lucky?? The distressed homes can be truly revolting to many buyers who are just not preparred for what they will see...even when you try to prepare them, they still don't quite believe it until they see it for themselves.

Hi "Greater Mortgage Guy,"

Definately a combination of both and thanks for stopping by.

Therese,

I couldn't agree more. People for the most part just have no idea what it takes to rehab most foreclosures!

Hi Sybil, Thanks for your comment and for stopping by!

Not only that...but from a feng shui point of view, there's a reason these homes have not supported their owners. It could be a one time thing...or it could be these houses have an energy that will always promote disaster in one way or another.

In flying star feng shui we can "do a chart" on a house and predict the effects on the people living there. Hard to believe, I know. But, it's a pattern we see daily.

In the Ocala Florida market we have several new homes that have never been lived in. The risk that buyers take with foreclosures is that the bank can pull out at anytime regardless of what the buyer has invested. HOA fees are an issue in our area.

Hi Monica, I'm not very well versed in the art of feng shui but do know there is a lot to be said for it. Very interesting and thanks for stopping by.

Hi Dawn, Absolutely...with foreclosures there are so many risks involved they are really too many to mention. I always talk to my buyers before we go out looking at homes and give them information on Foreclosures, HUDS and Short Sales and what they can expect...they still want to see them however once they do...most often it's then the Bubble finally Bursts.

Therese....

We are selling a lot more "standard" properties as savvy buyers seek move-in ready bargains!

Just had this conversation with clients today, matter of fact. Most of the foreclosed homes are bought IN BULK by large investment banks who have a pipe-line, and have had this pipe-line establsihed for years. The best deals are made on the court house steps, for cash. The HUDS and foreclosures that actually make it to the MLS, to our market, are DOGS . . . that no one wants, not the investors.

This is a great post. This has happened to me alot lately. Many people are coming to me with the expectation of finding a great foreclosed property. After viewing a few, they are usually ready to start loooking at "normal" homes.

Hi Richard, That's the way things have been moving for me. It's also going to be much more difficult to sell the distressed homes with the Tax Crdit deadline looming ahead...time is running out and investors may decide to wait and see what the new year will bring.

Hi Carla, The investors buying in bulk is so true and it leaves the dregs for the rest of the public. Thanks for stopping by.

Hi Vanna, Thank you for the compliment and comment.

So many people think they want foreclosures until they face the reality of how bad they are.

I always meet with buyers and insist on a counselling session.. during that session we have "the TALK". They listen in disblief... and then it takes a couple of homes.. and they GET IT!.... I even saw a listing on an REO property last week that stated "strong urine smell"... and that was pretty minor compared to others I have shown.

Im not going to agree or disagree with your post becuase every market,transaction client is different. Here in San Antonio the HUD/REO and shortsell market is outstanding. There are several houses right now that are ready move in or near ready move in. Now true you can not get them for pennies on the dollar like they want but take the following example : listed on contracted hud site for texas www.southwestalliance.com

Property #: 495-755533

8231 ROCKWELL VISTA
SAN ANTONIO, TX 78249
COUNTY: BEXAR

This house is listed at 191.4K it is appraised by the county at 195K market value is a little over 200K. As we all know (secret) on HUD houses in Texas at least, you can bid 10% the list price and if you are the hightest net bidder or only bidder you will more than likely get the house. So this particular house since it is on a daily bid if you would bid 172K you would win the bid. But seeing this house has been on the market 32days We all know that after about a month on the market and a house not selling then HUD lowers the house 10% and then you can bid 10% below the new listed price. so your looking at getting this house at about 155K.

So your right people are watching too much TV and your not going to get a house pennies on the dollar but getting a house like this one(by the way i have seen it and it is pretty much ready move in in a gated community)at 173K for a first time buyer or at 155K for an invester is a very nice deal/investment.

P.S. REO's are also plentiful as far as nice ready move in ones in SA. TX :)

Most of my buyers feel the same, but ALL of the HUD homes in my state sell usually quickly.

Seems like more investors are buying these type homes in our area. Many of our first time homebuyers are looking to get a VA loan and these don't qualify most of the time.

There's nothing like a bad smelling house-especially urine-to curtail the foreclosure and short sale shopping is there? When I was new in the business I used to try and talk buyer out of looking at distressed properties. Now I've learned to be patient and let the condition of the properties do the work for me.

My niche is new homes so you will find I am partial to selling new. How many first time home buyers can afford a new roof, new air conditioning, etc. that can occur when purchasing a distressed property?

People need to look at the total cost... including not just the price, but the cost to bring it up to spec... Often, the best deals are the ones that don't appear to be the best deals.

Your post makes a lot of sense.

Hi Therese. In the Tampa Bay area many of the foreclosed homes need *alot* of work. Unfortunately the media does not divulge that part and some buyers expect these homes to be bargains. There are some bargains out there but not all of them are like that....

Yep. Idealism slowly but surely gives way to stone-cold reality. Buyers who thought they were going to get a steal find themselves now either priced out of the market, or having to lower their expectations and take what is out there in movable condition at a reasonable price.

Kinda off the subject but how do you make the nice looking post with HTML? Any tips on how you do that thanks.

SEP

2009

This is exactly right-- everyone thinks they want a foreclosure but then they see how bad some are and decide on a home that will take less work and money to make livable.

You hit the nail on the head. Why would a first time buyer want to purchase a foreclosed or HUD home. It takes a few viewings of distressed homes for reality to sink in. Now that prices have creeped up a bit, I've seen more "regular" sale homes on the market competively priced. Thank goodness.

First Time Buyers in Jenison, MI: As you can tell by Therese's post, She knows her area and what is available in that area. You would do well to contact her for homes in your area.

Therese- Very well said! I too see the same thing, and many buyers are unaware of the deplorable condition some of these so called "bargain homes" are in. Most will not qualify for FHA financing, and while there are alternatives such as 203K programs for rehabilitation it is not for the faint of heart.

In the end, most people feel there is too much work and money involved in rehabing these distressed homes and seek traditional Real Estate as an alternative to the endless wait of short sales, endless restoration of HUD and foreclosed homes finding a turn key slightly more expensive home a better alternative.

Beautifully written! I really feel for the buyers who arrive with the expectation of buying a home with "instant equity" and then find out the reality of the market. Now and then that "deal" may be available here, but that is the exception and those properties are snatched up quickly.

I have seen many first time buyers with unreal expectations on foreclosures and REO homes. It just may not be the best deal out there.

I hit the magic re-blog button on this one Therese. Very important message here. I've been showing a lot of distressed properties to first time home buyers and I always get a little worried when they get that glimmer in their eye. Can they really fix it up? Buying a home for the first time is stressful enough without having the added stress of fixing it up and making it livable.

Therese, I had no clue you had changed companies. I am assuming you are with Gary. Good post, glad it was featured. We run into this all the time. The buyers "think" they want one....then they look at others, add up the cost of repairs and say no.

Now not everyone does that, some want the deals, but many do.

I like your "vision shifts" concept. There is a lot of true grit not to mention risk and home improvement skills required that frequently become overwhelming. Some of the best buys are the regular homes competing to catch up with the prices of the foreclosures etc.

Funny thing, I clicked over here while writing up some ads for HUD houses, so of course your post caught my eye. HUD can offer some very attractive financing for first time buyers and it's about the only thing going where you can buy a fixer as a FTB (insured with escrow deals). Having said that, I'm always amazed at the people who say they ONLY want to look at REO/HUD. I always explain that it doesn't matter who is selling, what matter is the price vs the value you are getting for that price. Doesn't always convince them until they see some of the real wrecks.

I have the same issue, buyers asking specifically for REO. First time buyers, I usually try to explain that often, they wont even qualify to get the loan (FHA) since the standards are so high these days. Unless the home is in wonderful shape (usually its not) it's probably not going to close.

I always get a kick out of the buyers who contact me indicating they want foreclosure lists, or wanting to know about foreclosed homes. In our area we have be fairly insulated from foreclosures and are now starting to see them across the entire spectrum of price ranges, and conditions. Foreclosure buyers seem to have the impression that they can put in an order for just the right house--HALF PRICE! But the banks are often not as motivated as a couple moving to a retirement community or heirs selling a home in an estate. I always ask if they are looking for foreclosures only, or would a good deal on a home that is not a foreclosure be ok with them?

I would like to see an HGTV show on a first time home buyer who thinks they want a foreclosure and get a close up of their reaction when you take them through a few. When buyers tell me that they watch such and such show on HGTV, I remind them that TV is entertainment, and "reality" shows are very much "staged". We still go look but when they understand what I was talking about, its only helps my credibility.

In the somewhat limited geographic area in which I work, there has only been 1 HUD home (this past July) and it sold very quickly - under contract within 7 days I think - HUD homes are better than other foreclosures because you get a good inspection report right from the start and they also have that good neighbor program. I counsel first time buyers that foreclosures are probably not something they are going to want - - their financing (often MSHA or RDA) probably won't cover due to condition issues - - often, a buyer will have to put in flooring that has been torn out, there will be NO appliances, everything will need to be scrubbed and painted before you move in, often debris must be removed. They are a hassle to purchase, as well - in addition to being hostage to the whims of the investors, they have been winterized and the buyer must have utilities turned back on in order to inspect, Seller's Disclosures are all "unknown" so you have no idea what you might be getting. They really are for cash buyers - contractors looking for a project to flip are good candidates for these. If the First Time Buyer says they are still interested, I will take them to look at a maximum of 2 bank owned houses of their choosing - you see $$$ in their eyes as they add up the work they'd have to do - not the great deal they thought it would be. That's enough for them to decide they don't need to see any more.

I still get this occassionally but nearly as often as I had in the past. Apparently buyers in the Los Angeles area are realizing they can't believe everything they read and are getting more realistic about what they want and what it will actually cost them.

Therese, what a great post! The vast majority of HUD and REO homes are in great distress that will require many $1000.00’s of dollars and hours of hard work to bring them back to a livable condition. Once the client sees the home inspection report with so many defects they are scared off. Not everyone can stomach the amount of repairs needed.

Hi Therese, I agree totally with you. They should have gotten "that stinkin mattress" out of there...grin.. great blog.. yes, I see that other well priced homes are beginning to sell. These huds, and foreclosures, usually need lots of work. thanks for sharing!

Therese, in our area, bank owned generate a lot of interest due to pricing being lower than the norm (usually, for obvious reasons). A suggestion to those being inundated with foreclosure-seekers would be to share with buyers an "as is" addendum before looking- we've seen buyers that, while enamored of the "deal", are not enamored of the stark reality of an "as is" addendum. It might weed out those that understand the process from those that don't- if they're fine with the "as is", they may well be a good candidate for a bank owned. If not, you've saved some time (theirs, and yours)...

Hud does have its fair share of very distressed homes. The homes that show insured or insured with escrow without much to do, end up being a bidding war. A few of my collegues and I are facinated with how many people are bidding on these homes and how they are bidding thousands over to get them. A friend placed a bid for a client on a hud home for 99k. The list price was $94,900. Her clients never had a chance. The winning bid was $127,900. There were almost 60 bids and 5 of them were $115,000 and over. One of the best ways to get a hud home for someone with limited money to add to their loan is to wait for daily bidding. And we have to watch the hud homes like a hawk because many do fall through and go back on the market. My only concern is that the closer we get to this deadline, the bidding wars are gonna get ruthless. It already takes almost 60 days to close a hud home. Many might miss out if they don't go under contract like NOW!

If it's too good to be true, it usually is!

Patricia Aulson/portsmouth nh homes

I tell my buyers a decent REO or short sale will likely need $10,000 for repairs, paint, carpet, landscaping, and cleaning. If less, they'll be lucky. This is for the Phoenix West Valley where most houses are under 10 years old, 3-4 bedrooms, 1500-2500 sf, selling for under $200,000. Many require more work since they've been neglected for 10+ months and can have other issues that only a good inspection will find.

Currently, about 60% of our solds are REOs and they have really made appraisals tough since condition is not really emphasized in them.

I also qualify my buyers to see if they truly have the desire (oh, yes), cash (oh, no), abilities (huh?), and time (who does?). If nothing else I have planted the seeds before we go out and like several stories above, they get a rude awakening about what they are looking for.

We all need to remind clients and the general public that the sales price of an REO is not the move in price and this gives a deceptive feel to what is going on. This is important for markets that are seeing a heavy (10% plus) REO presence.

In Sacramento, many of the bank-owned homes are in fairly decent shape. The problem buyers face here is multiple offers and beating the competition to win that bank-owned home. And when they win it, what they get is a strictly AS IS sale. No repairs, generally, no home warranty. Whereas buying a competitively priced home that is NOT a foreclosure gives buyers the right to request repairs (not that they'll be granted, btw) and a different comfort level because they will also receive disclosures from the seller, which a bank doesn't provide.

As a new agent I can totally relate to the question "how things are going for me in real estate". The current market is different for everyone. It is an individual story from the person who looses a home to the investor who obtains a bargin and the first time home buyer who faces the reality of which you speak when walking into a distressed property/seller. The bottom line is 'this is the market today' and we all, buyers,sellers,agents, must work with what we have. An agent who does not advise their seller on presentation of a property for prospective buyers is remiss. Perhaps the seller is not motivated or unable to financially improve the property but there is really no excuse for not cleaning it up for company. Your buyer can purchase another property and no doubt did just that.

Many people want a Fixer Upper that just needs the floor swept and a little paint. When they see them they really don't want to do what needs to be done.

Hi Russ, Yes they do and the reality is usually quite a shocker!

Hi Joan, I couldn't agree more..I also have a talk about the REO's and Short Sales with my Buyers before we go out to look at them. We even have a disclosure that they must sign which confirms they have been made aware of what the Purchase of such a property may entail. But for the most part they simply have to see them for themselves to believe it.

Hi Adan, This post was really based on my personal experience when working with FTB. I know we have more than a few Realtors in our area who do sell many for they are definately a big part of our market. Sounds like your market is quite different from ours for our average sale for a FTB is in the range of about $80,000 - $120,000. Anything over that and it is really stretching them, most of the REO's and Short Sales in this range do require a lot of work...all though there are those gems every now and then! Thanks for your comment and for stopping by!

Hi Linda, HUDS selling quickly...you are lucky! The good ones we have do get snapped up however we have more than our share of "the really distressed" out there.

Hi Roland, Thanks for your comment and for stopping by!

Educating the buyer is just the first step on the tour. Sometimes the words 'fixer upper' is subjective to each buyer. One person may be a total gutt job and the other means only paint. Level of skill is also good to consider. I've personally noticed that buyers nowadays don't know a hammer from a nail. That's not the kind of home that you should choose.

You took the words right out of my mouth! This is absolutely true in my experience as well. Thanks for writing an awesome post - excellent for re-blogging.

Hi Rich, Stopped my Buyer cold! Patience is the key for they will figure it out for themselves.

Hi Julie, Great niche' to have! Once they start adding up the true costs not many.

Hi Lane, Couldn't agree with you more.

Knightyme Video Tours....Thanks!

Hi Lana, It's very dissipointing to our Buyers finding the reality of these homes varies greatly from the perception they have learned from the media. Sounds like you are having similar circumstances.

Hi William, For our Buyers having to "lower their expectation" can be tough and quite often there is no other option. I am currently working with a Buyer who began looking at REO's Short Sales etc, then went to normal homes (which were out of the range he wanted to spend) although he could afford to go more. We are now looking at condo's as this can often be a great option for a FTB also and it looks like we will be making an offer this week. You just have to let them find their way through the maze of properties.

Hi Mike, I am probably one of the last people you would want advice on for this however I actually used Microsoft Publisher and copied/paste from there, it worked well for me. You can also use Google Docs. I think you may get more information and help if you run an AR search asking your question...I seem to always able to find help there. Hope this helps a little!

Hi Bob and Carolin, Thanks for your comment and for stopping by!

Hi Alma, Thanks!

Hi Judi, You are so kind! ...you may be my new BFF!! :-)

Hi Allison, Thankyou! They definately are not for the "faint of heart"...well put!

Hi Mary Ann, Thanks so much! Sounds like you have similar circumstances in your area.

Hi Laura, couldn't agree more...thanks for stopping by.

Hi Erin, Your comment on how stressful these transactions can be is a very good point! Once we have educated our Buyers as to how the process typically works it can not only be overwhelming but disheartening as well. If they chose to move ahead with the REO's we take it one step at a time!

Do buyers really realize buying a home that they have to fix up can be a money pit? Also it means keep the car gassed and running when you do those projects because it will be endless trips to the local hardware store.

A well-maintained, competively priced, non-distressed home wins every time in my book.

Linda Metallo, Re/max Impact, Lockport, Il.

Therese- Many of the HUD homes and foreclosures around here (SoCA) sound very much like the ones in your area. I work mostly with first time buyers and most of them start out wanting to get a "great deal on a fixer".

After a few months of looking at run-down, dilapidated dumps and losing offer after offer after offer to all cash buyers, they become completely discouraged and turned off from looking at anything else - PERIOD!

These days, trying to keep my little first time buyers motivated and out there looking is becoming more and more challenging all the time.

Hi Missey, Great to hear from you and you assume right! I have to admit I'm surprised at being featured and for all the comments this has received...but it's great getting he feed back and comments from everyone.

Hi Cheryl, Thanks!

Hi Julia, I liked your statment, "it doesn't matter who's selling, what matters is the price vs the value you are getting for that price." Very well put, sounds like your Buyers are in very good hands!

Hi Paula, It's just a matter of walking them through the process and letting them see for themselves. No one will understand what is their best option until they have seen and comparred properties in person. I usually don't even get into the financing end...it hasn't been necessary. It's a touvh market out there! Thanks for stoppping by!

In this market there are pristine foreclosures, uninhabitable foreclosures and lots in between. Buyers need to understand that just because it's labeled "foreclosure" doesn't mean it's a deal, especially if renovations cost thousands upon thousands.

Hi Jill, Ahhhhh....the Foreclosure list! We have foreclosures across the board in various price ranges also and they are very seldom a smooth transaction no matter what price range they fall into. No easy "order Placement" for HALF PRICE here!

Hi Kathryn, I don't know if that would make me laugh or break my heart! In my experience when they see the condition of the homes themselves it does help your credibility because they see you are honestly trying to help them understand this difficut process and the amount of time, talent and money it will take to get into one of these properties.

Hi Terry, Wow...only one HUD home?! I recently went to a seminar on HUD homes and found in our area they are letting you know if your bid has been accepted usually within 3 days and you can most often close within 30. So they have made some good strides in the right direction. I'm not saying this process is easy by any means but at least there is improvement in our area. It seems I usually show about 3-5 REO's etc... before my clients want to move onto the "normal sale homes." You make a number of very good points in your comment and thanks for stopping by!

Hi Jenny, That's great news for you and must make your life more than a little bit easier!

Isn't it interesting that so many of your foreclosures are distressed properties? I got out of selling before this wave of foreclosures hit, but when I was an agent I handled Fannie Mae properties in our area - and all but one of those homes was trashed!

The one exception was a home owned by a couple who didn't want the town talking about how they left their home. They had it winterized and hired a professional cleaning lady to come in after they moved out.

In some you could see that "trashed" was the way they lived. The dirt and grime was firmly in place, and the garbage looked as if it had been there for many years. You had to believe that they were people who just didn't take care of anything - and who spent whatever money they had on clothes, because they had so many that they left mountains of them behind!

In others, you could see that the angry homeowner who lost his/her home had taken revenge on the place.

We never did find out if it was the homeowner or someone building nearby, but one of my Fannie Mae listings had been robbed of the water pressure tank, the furnace, the kitchen sink, a bathroom vanity, all the light fixtures, and even the cover plates for the light switches. They tried for a tub but couldn't get it out.

I'm thinking "homeowner," because they had also thrown rocks down the well.

Homes like that are not projects for the faint of heart nor for buyers with no fix-up experience, and many wouldn't qualify for VA or FHA financing.

In those days Fannie paid to have all those things repaired, while others, such as Money Store (remember them?), Washington Mutual, and others sold as is.

So I'm curious - does Fannie still do fix-up before putting homes on the market? If so, then buyers could probably still get a "good deal" on their REO's.

Hi David, Thank you! Lucky for me my Buyers have made their decision to not pursue REO etc...homes way before the inspection process. It is a much more difficult pill to swollow once $ has been paid out. With that being said there is no denying the inspection report and if the Buyers get this far into the process it is definately where the Rubber Meets the Road so to speak!

Hi Ginger, Thanks! I can tell you we definately were not grinning!! lol. It was stinkin! Thanks for the comment!

Interesting. About 90% of the homes that I sell are bank owned or short sales even though I show everything to my clients.

Hi Laurie, That is a great suggestion. I will always go over a Foreclosure Disclosure form with my clients step by step before we begin looking, however they still hang in there until there is no shutting their eyes to the condition these homes are actually in. Factor in al the costs etc....and they are usually moving on.

Hi Tisha, You made some very good points. I've also heard of the HUD bidding wars (thankfully have not been involved in one myself) where there were multiple bids way over the listed price, so much frustration and disapointment in these situations and the Buyers never knew what hit em! This is the type of information our Buyers never hear in the media regarding these types of sales. You are also right in that the deadline is looming and I hesitate to even think about what will happen to these sales which are pushing this deadline. Fortunately in this area the HUD homes are closing in about 30days...but that may be changing if their is an onslaught. YIKES!

Hi Patricia, You said it! I tell my kids that all the time...

Hi Eric, I like your statement "to remind our clients and general public that the sale price of an REO is not the move in price." This is something that they can digest and relate to...simply put and easily understood. I'm going to use this with future Buyers...if you don't mind. I also enjoyed your 3rd paragraph...made me lol. Thanks for your comment.

As a general contractor, appraiser, and wannabe investor, I frequently see REO's or foreclosure properties that are in a condition that's nearly unbelievable. In our area of So. Cal., that's the rule, rather than the exception, for those types of properties. Optimistic first-time homebuyers usually have no clue as to just how much work is involved in some of these repairs. Missing (stolen) air conditioning units; pool equipment; water heaters; appliances. And those are usually removed using the BF&I method, so there's almost always additional plumbing, electrical, and venting/ducting work that has to be done, and brought up to code. Some of the damage is not even noticeable at first, unless you know what to look for: Sprung hinges on doors; missing locks on windows; door locks that have been rendered unusable. Most of the damage is usually malicious and can include things as nefarious as walking out the door for the last time and leaving a sandwich bag over the shower drain and leaving the water running! It's amazing what people can do in an 'altered' state-of-mind, usually because they've just lost their house and feel the need to vent, or blame someone.

As an aside, I put a bid in on an REO in Huntington Beach that was in a great area. Unfortunately, the previous residents had cats that apparently urinated anywhere in the house the wanted to (and everywhere, actually) which ruined the hardwood floors (some of which had carpeting installed over) and made the entire house reek. You learn a lot about people when you can inspect their (previous) living quarters. Since I'm in Riverside County, I get to interact with people in an area that has one of the highest unemployment rates, and highest foreclosure rates, in the country. If you read through the comments, you'll probably find that parts of Florida are very similar in the effect these statistics have had on the condition of REO's & foreclosure properties. Las Vegas has similar problems.

Hi Elizabeth, That is really great that you have these homes in fairly decent shape. One thing for sure though (after reading all these comments) is that the process is never easy no matter where you live. One good advantage our clients do have and it's actually their ace in the hole is that they have many options and can choose the direction they want to take. Thanks for your comment Elizabeth!

Hi Linda, So true...so true. It is such difficult times for so many and when I think back to that home I believe (if I were the listing agent) I would have offered to get a matress for them. I'm almost positive one could be picked up at a thrift shop for minimal $ and then a matress cover also.

Hi Gene, That's it in a nut shell.

Hi Lynn, You are totally right. The words Fixer Upper can be very subjective and many Buyers don't know a hammer from a nail...never had too and don't want too. These homes are definately not for them.

Hi Dianne, Thank so much and you're welcome!

I love it when somene tells me that they want a fixer-upper foreclosure and what they really mean is they would like a house in like new condition - really cheap, if possible!

Everyone thinks they cann steal a foreclosure. There are few worth much more than land value along the coast. Not only investors, others have the money and desire to be here or buy their 2nd home while prices are down. During July 36% of our buyers were stricktly cash. We certainly are not booming but there is activity.

Hi Linda, I always think of that movie with Tom Hanks and the Money Pit home. lol I believe the Buyers do give consideration as to general repairs and upkeep etc...what is so shocking to them is the state of these homes which is something that catches them totally off guard. How can you prepare for it if you have never seen it? I agree with you that a well maintained, competively priced, non-distressed home is most often the best option. Thanks for your comment!

Hi Donne, Gosh, you really have your work cut out for you! It takes them months and offer after offer after offer...you certainly have the patience of a saint and I hope your Buyers are grateful for you. Are most of your listings REO and HUDS? Is your market such that the housing in these areas do not have Non REO and HUD homes competively priced to be able to give your Buyers as an option? Sorry, so many questions...I just feel for you and your situation.

Hi Barb, You are so right...some Foreclosures are Pristine and some Uninhabitable and just because they are a Foreclosure does not mean they are a good deal. Well stated and thanks for stopping by!

Hi Marte, Wouldn't it be lovely if all homeowners cared so much about all of their homes? I just have to believe they just are not in their normal frame of mind for they are losing their homes and personally I cannot think of many things that could be much worse. We have seen that here also, homes basically destroyed inside even heard of one where the toilet had been removed, cement poured down the sewage pipe and then the toilet replaced...this was not found in inspections. Again...difficult time for many.

Hi Jirius, That's great for we need to move these homes...I wouldn't mind at all selling them, it just hasn't been what my Buyers have been choosing.

Hi John, It is disheartening to see the state of these homes and also understand what financial and emotional stress these Sellers are going through that brings them to a point where they can inflict such damage. I think pretty much every area with Foreclosures are experiencing this problem to some degree. Thanks John.

Hi Julie, That's pretty much the FTB dream...until they are unfortunately forced to wake up. Thanks for your comment.

Hi John, They are not going to find better prices eventhough they are pretty much just paying for the land. Having 36% of Buyers paying cash in July....not to shabby! Best of luck to you!

Therese, Yes, you can use my line about REO purchase price does not equal move in cost. I wish more agents would talk about this more since the neighborhood around these homes are affected the most with these below value sales prices.

I'm glad you enjoyed the 3rd paragraph. It's something we need to keep in mind when talking to people about these homes. "I also qualify my buyers to see if they truly have the desire (oh, yes), cash (oh, no), abilities (huh?), and time (who does?). If nothing else I have planted the seeds before we go out and like several stories above, they get a rude awakening about what they are looking for."

Enjoy, Eric

Therese - I've had the same experience here in San Antonio. Everyone wants them until they start seeing them. To complicate matters, many of our foreclosed properties have not been taken care of during our long drought and we are seeing a lot of foundation issues. In many cases, these homes are not priced to reflect the repair work it will take to get the foundations back up to par. It's sad really and I think banks are going to have to start taking that into consideration or they're going to wind up with a home they absolutely can't sell.

My first time home buyers decided to wait until they are in a better position to buy before they view anymore homes. WE looked at numerous REO's and Short Sales before the buyers reluctantly agreed that they don't want the headache and the potential extra expense and waiting time which is sometimes necessary to negotiate contracts for those types of homes.

Therese,

So true. Many first-time buyers often simply lack the experience to deal with a fixer-upper home. Once all that's involved is explained, including the cost, they'll get cold feet.

Hey Therese, Congratulations on the Feature! Very well deserved. I think many people are finding that things aren't always what they seem. Like you point out, there are good deals out there which are HUD homes and other types of distress sales, but the good deal has to be placed within the right context...such as the downsides of times, expense and hassle.

Therese - Thank you for your kind words. I appreciate it. It is sooo tough in our market right now. Our market is driven by REO's and short sales. Most of my clients don't have the time or patience for short sales and the competition in their price range for REO's is typically with all cash investors.

It's so bad, many of the seller/banks for the low end REO's are taking lower cash offers over higher financed offers. When my clients hear this kind of stuff, it's hard for them not to wonder what's the point.

Hi Eric, Thanks much...keep on planting those seeds!

Hi Matt, That is one I have not heard before...foundation issues due to drought! If you don't have a good strong foundation you don't have a house. I certainly hope the banks do take this issue into consideration sooner rather than later or it could be too late. Very best of luck to you.

Hi Sabrina, For many it is just too much to take on at this point in their lives...I hope this is not the case for the majority of your Buyers. Thanks for stopping by!

Hi Esko, So true for many FTB unfortunately.

Hi Lola! It's great to hear from you and thanks for the congrats! I have been pleasantly surprised with all the great comments this post has received and also in hearing that this is something many other Realtors have been experiencing also. Thanks so much for stopping by. :-)

Hi Donne, You are very welcome! Having your clients continually run up against cash investors is extremely difficult. I also have experienced an offer being accepted over my Buyers that was significantly lower than ours however it was all cash. Thankfully that has been the only time for me. Please hang in there...you sound like a wonderful Realtor.

It is rare that I find a foreclosed home that is in great condition. It is even rarer that I find a first time buyer who has cash to fix up a foreclosed home! Good points.

Therese - LOL - I'm not a Realtor, I'm a Loan Officer. But I do work closely with my clients as well as and their Realtors in trying to do everything possible in order to get our mutual clients into escrow. Most of my clients are first time buyers, many of which are utilizing a first time buyer dpa program to purchase a home. Most of these programs are restricted to certain areas that have been designated eligible to assistance because of the large percentage of foreclosures for the area.

Excellent reminder. It constantly surprises me how buyers just assume that a foreclosure is what they want.

SEP

2009

Very true Therese. Many of these HUD foreclosures are more like condemned homes than residential.

Therese - great points. Unless you are handy, or know someone who is, it's wise to stay away from fixer-uppers.

Hi Donne, Oh my gosh your right! lol I am so sorry, after readying your first comment my Realtor Brain went right too....you got it...she's a Realtor. It's been great chatting with you!

Hi Damon, Very rare indeed! Thanks for stopping by.

Hi Richard, Thanks!

Hi Mark, Thanks for your comment!

Hi Jacki, I totally agree. Very difficult for any FTB unless they have the talent etc...or know someone who does.

Yeah, it's wierd how some buyers have asked ONLY to see HUD and foreclosed homes. There are other homes priced more agressively BECAUSE of the downward pressure caused by the distressed homes. This sometimes make a decent deal, on a decent home, at a decent price. INSTEAD of just focusing on the label of "HUD" or "Foreclosed".

GAMBATTE'

Hi Mark, You're absolutely right. If more Buyers could see their way to starting off looking at properties based on their wants/needs and price it would get them off to a much better start and (most likely) a more positive experience. Thanks for stopping by!

Hi Therese,

I totally agree with you. Most Homebuyers that I Pre-Approve don't want to be fixing up a home, but want that "Perfect" move-in type of home. That's why I didn't really jump on the Bandwagon for the REOs. Now, I do run across some Buyers, whom the husband, works in Construction of some sort, and wants this type of project (of course, assuming they get a good price on the home). This is another reason why I haven't spent much time on the "Rehab" loans because I've Approved a few First Time Homebuyers, then they elect either they don't want to continue in this niche, get scared about buying (as we can probably attest is common with many First Time Homebuyers) or haven't been able to get an accepted bid. Amazingly, many Homebuyers don't realize they can still get good prices on homes that need minor repair (or updating) or move-in ready that are comparable to REOs. They probably don't realize the Banks have their numbers based on the BPOs that were assessed. Thanks for the post.

Aren't the HUD homes in worse conditions because government that takes care of them? What about the bank owned foreclosures? I've been searching properties in this website and they say that bank owned are the best option!

With so many first time buyers using FHA, many don't realize the rigorious FHA appraisal process these properties must pass. I'm sure the ones you described would not pass on their best day. On top of that, many buyers are not willing to give the time commitment to close on a foreclosure. When I tell them it can take months get approval, most start to re-think their options. The distressed markets provide great opportunities, but I think first timers are better off looking elsewhere. Great post... very good perspective!

Wow! A featured post:)

I totally agree and luckily haven't been showing too many of the bank-owned lately. Still dealing with a lot of short sales, though.

If the buyers are willing to put up with a little bit of extra hassle they could always try out the FHA 203k loan program. I don't have any experience with this loan yet, but I've heard good things from some other agents that have.

- <a href="http://www.limaohiorealestate.com">Lima Ohio Realtor</a>

Therese,

Foreclosures can be a great deal but they certainly aren't for everyone! As a former mortgage broker, I learned you have to expect costly repairs prior to obtaining permanent financing. Also, many states have a redemption period, allowing the former owner to redeem the property, which affects financing. I discuss purchasing foreclosures in my book "Getting to Closing", www.CherylLPeck.com

The key is to have patience and keep looking. The good deals are out there!

Therese- Like #107 mentions above, 203k loans can be a great product for today's foreclosure market, especially since many foreclosures are run-down and dilapidated dumps that won't qualify for financing, FHA or conventional (which can be just as stringent as FHA guidelines).

However, having said that, these loans are not for wussies and I speak from experience when I say this. These loans are not only riskier for the lender (which is why not every lender offers them) but they can be challenging to process and close (which is why some LO's won't do them).

While there are several lenders that will offer the streamline 203k for up to 35k, there is only a small handful that specializes in the traditional 203k. There are quite a few scenarios that can make or break these transactions in heartbeat and a buyer interested in this product really needs to work with someone who is familiar with these loans and the process. JMHO :)

Hi Mike, Thanks for stopping by. It seems we all have our struggles with our Buyers in assisting them the best we can in finding that home which fits their needs and price then bringing them through to a successful close. I've been fortunate in that I have not had any Buyers scared off however I have had them go from looking at REO's to Normal Homes and then end up with a Condo! At the end of the day...if they're happy I'm happy. :-)

Hi Tony, That is a very good question and I wish I had a quick and easy answer for you however there are so many variables involved I truly don't believe there is one.

How long did it take for the home to get through the foreclosure process?
How was the home treated by the previous owners and how much damage (if any) was inflicted?
Has the home been winterized? If not, has there been water damage to the property? Mold?
What price range are you looking in....sometimes the higher priced properties may not have incurred as much damage.

**Just to name a few.

The longer a home sits empty the more distressed they become. Unfortunately, it has been my experience that once the house is in foreclosure (and the home owners gone) no one takes care of it, it doesn't matter if it is a Foreclosure or HUD. I would say to begin looking at the Foreclosures first simply because they have been in the pipe (so to speak) a shorter amount of time. Also be aware that the purchasing process whether it be a Foreclosure or a HUD can and will be challenging...so prepare yourself and take it one step at a time.

**Please don't entirely eliminate the possibility of finding the home you're looking for in properties that are not a HUD or Forecosure for as many have mentioned in the comments above, Buyers are finding their DEALS in homes that are not caught up in one of these processes...keep your options open.

I haven't even touched the tip of the iceberg here in regards to all that is involved in these processes, if I can be of any more help at all please just let me know....I'm always happy to help.

Hi Will, Great comment and thanks for stopping by!

Hi Ed, Thanks! Hmmmm...Short Sales can be a tough deal too. :-)

Hi Cheryl, You're right, they are dinfinately not for everyone and patience is the key.

Hi Donne, Thanks for the information, as I'm not very familiar with the 203k loans it sounds like something I should look into and learn more about.

SEP

2009

I love bank owned properties...most of the ones around here are decent and the prices good enough to get multiple offers. The ones that languish for months are priced wrong (from an out of area realtor who doesn't know the market) or in tough condition. Short sales are usually the best deals for someone willing to wait. (I am not patient!) :-)

Therese, The HUD homes do sell quickly here no matter what condition - they always sell. It's somewhat comical when my name riders disappear from the signs in front of the HUD homes....I guess some think that removing my name will keep me from finding a buyer before they get a chance to put a bid on the home.

SEP

2009

Right now I have 3 listings that are being sold by owners. The activity has been tremendous. One listing had 4 offers within 36 hrs. My buyer clients too get frustrated with short sales and lender owned. Pricing correctly is the key to a successful sale. Thank heavens the buyers I have been working with are not insisting on low balling.

Hi Linda, Having the HUD homes sell quickly is great. Pretty funny to hear about your name riders...you just never know where people come up with these ideas. Thanks for your comment!

Hi Mary Ann, Wow...you are getting some serious activity, good for you! It is definately an advantage to be working with sellers who are willing to price their homes correctly and buyers who do not insist on low balling their offers, for this sure helps the transactions process more smoothly which benefits everyone involved.(always a good thing) Thanks for stopping by!

That is the nature of what we do here. These properties are not for the faint of heart. Reality does set on with those buyers and some handle and some can't. Sometimes they listen to the wrong people and get into a pickle.

OCT

2009

My husband and I bought our 1st home over 20 years ago...............it was a VA REO. We bought it for 26 grand and then sold in a year and half for 58 grand...................then so and so on..........

However the key and the reason for this success, is my husband is an engineer and can/could do most of the work.

Not every one has that talent............I am very careful in screening buyers. Sometimes they are very qualified, or family is very qualified to make the repairs needed on the home. It is like a buying a shirt on sale - great deal only if you are going to wear it.

However, unless we get word in the next week.............these type of purchases may not be the one to buy if you are looking to get the 1st time home buyers credit. Private owner sale is the way to go right now.

GREAT post!!! As always - buyer beware!

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Therese VanderMeer - Realtor - FlexIt Realty

Jenison, MI

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1515 Michigan St. NE Grand Rapids, MI 49503

Office Phone: (616) 784-2360

Cell Phone: (616) 780-0786

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Jenison MI and the Greater Grand Rapids areas, real estate related information including houses for sale, rent and Buyer/seller tips from Therese VanderMeer FlexIt Realty.

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