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Such a DEAL! . . . Maybe It Really Isn't

By Carla Muss-Jacobs, RETIRED

Industry Observer with RETIRED / State License is Inactive Inactive License Oregon

January 28, 2010 01:04 PM

This blog was inspired by Charles Buell's The Perfect Storm

I started thinking about this, and realized how amazed I am that some short sales, but mainly foreclosures are coveted by Buyers.

Why?

Because Buyers think that a Foreclosure, mainly, is a great bargain. The lure of getting something for nothing, or a lot of house for a little buck.

Sometimes that's the case. Most times, it's not.

The main thing to consider when you are representing a Buyer, or are a Buyer, is condition. The condition of foreclosure property might be in dire straights -- a tear down -- or, it might need some sweat equity.

Rarely, and I mean rarely have the foreclosed homes I've toured been move-in ready.

If you're a Buyer, or representing a Buyer who is interested in Foreclosures, try to be realistic.

Do you have the funds to fix the place up?
Is the property going to fund?
Is the property going to be a money pit with unforeseen headaches (Netflix "The Money Pit")
Will the money you put in to it pencil out in the long-run?
Do you have the time and INCLINATION to make updates?
REPEAT: Do you have the FUNDS to fix the place up?

I toured a Foreclosure on Sunday. It had gone PENDING, but was back on the market. I took my clients out to see it. From the photos it looked fine. Upon closer inspection: the roof needed replacing, the garage door was dry rotted, the rain gutters were rusted (leaked), the flooring needed to be replaced, there were no appliances, and the siding (which the listing agent noted as "OTHER") might have been LP . . . the kiss of death in our local area.

This might have seemed like SUCH a DEAL on paper. It required a lot to make it move-in ready and that = MONEY!!

Looked GREAT in the photos! A lot do.

I hope the Buyers didn't waste spend money on a home inspection. Maybe what Charles is blogging about happened? And that would have been a shame! A good, experienced agent -- such as YOURS TRULY -- would have pointed out the issues, prior to writing an offer. Perhaps, saving the Buyers $300 to find out the OBVIOUS!!

Keep in mind, Foreclosures are sold "AS IS" in most cases. And "AS IS / WHERE IS" aka: What you SEE . . . IS what you get!"

And most Foreclosures are: YOYO (You're On Your Own!)

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Tim Maitski

Atlanta Communities Real Estate Brokerage - Atlanta, GA

Truth, Excellence and a Good Deal

I agree. By the time you get many of the foreclosure homes up to snuff, you might as well pay a little more for a home that has been taken care of.

It takes a while for this to become common knowledge though. Being a "foreclosure" has been a good thing as far as marketing a home. But I think soon, "foreclosure" might be a stigma and more buyers will start to shun them.

Jan 29, 2010 03:58 AM

Andi Grant

310-508-4354 | FirstTimeHomeBuyerRealEstate.com - Los Angeles, CA

Helping 1st time buyers and home sellers in LA!

Awesome post Carla!! If only they had "widescreen eyes" to see the bigger picture!

Jan 29, 2010 04:25 AM

Lenn Harley

Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA

Real Estate Broker - Virginia & Maryland

The hardest thing to teach a home buyer is that the difference in the pricing of the usual foreclosure and regular home owner sale is condition.

Jan 29, 2010 04:41 AM

Patricia Aulson

BERKSHIRE HATHAWAY HOME SERVICES Verani Realty NH Real Estate - Exeter, NH

Realtor - Portsmouth NH Homes-Hampton NH Homes

So true! Yes, you sure need to be alert to the maintaince/condition of the "short sale home". Check out the comment above by Debe, it says it all.

Patricia/Seacoast NH

Jan 29, 2010 05:38 AM

Karen Pannell

Real Living / Home Realty - Owensboro, KY

Owensboro KY Real Estate -270-903-2167 Homes, Cond

Girl, you hit the nail on the head! If it's priced under market - there's a reason!!!

Jan 29, 2010 05:59 AM

Patricia Aulson

BERKSHIRE HATHAWAY HOME SERVICES Verani Realty NH Real Estate - Exeter, NH

Realtor - Portsmouth NH Homes-Hampton NH Homes

Remember the old saying....."when it's too good to be true, it usually isn't!" Ha, I love this saying.

Patricia

Jan 29, 2010 06:24 AM

JL Boney, III

Coldwell Banker - Columbia, SC

Columbia, SC Real Estate

Most foreclosures in my area are not really a deal at all. Though they are priced below market value, it will cost a lot to make the property move in ready, so by the time that's all said and done, you could have bought a better home and spent less money in the long run.

Jan 29, 2010 06:44 AM

Bob Edwards

Coldwell Banker- The Real Estate Group, Inc. - Appleton, WI

Fox Cities Real Estate Hotline, SFR- Appleton, WI

Great post Carla, you're so right. When you sit down with the buyers and really help them crunch numbers they'll usually see that even though it appears they won with a great lowball price, it's not always a good deal.

Jan 29, 2010 07:56 AM

Michelle Francis

Tim Francis Realty LLC - Atlanta, GA

Realtor, Buckhead Atlanta Homes for Sale & Lease

Carla,

Great post, I've only once seen a foreclosure in great condition at an amazing price (and my buyers got it!) Normally, they are in such horrible condition that you can't wait to get back outside.

It's very tough to calculate the dollars, never mind the amount of time it will take to get these properties back in good condition. And you never know what you will find after you start.

Buyers really need to beware.

All the best, Michelle

Jan 29, 2010 08:09 AM

Carla Muss-Jacobs, RETIRED

RETIRED / State License is Inactive - Portland, OR

Hi Judy . . . I don't exclude them, but the reality sets in with my clients after they've toured a few of them.

Hey Susan -- pick up a foreclosure, and then pick up applicances, paint, drywall, new flooring LOL!

Hi J. Philip . . . the 'risk adverse' buyers will appreciate the well-maintained properties, for sure!

Hey Joe -- I have an (inactive) contractors license. I used to do the same thing, back in the day. Now, the prices (in my local market) AND the cost of repairs prohibit me from rehabbing. It was fun (back in the day). It is not for the faint of heart.

Hi Glen . . . a GREAT POINT! The true deals are made on the courthouse steps. When they get too market, they have been cherry picked!

Hey Nevin -- thanks for the additional comments. Yup, most properties don't qualify. And with housing prices tanking in my area, the 203(k) loans can't even qualify the property. The equity just won't be there.

Hi Jerry . . . Most people don't realize how labor intensive a rehab can be. After a long 40 hour+ week, I don't even want to VACCUM . . . let along paint, ripe out carpet, install flooring . . .

Hey Dianne -- I see very few "good deals" and they typically receive multiple offers, so it's more of a bidding situation at that point. Bring you best and highest, in other words . . . and STILL the property needs a little TLC.

Jan 29, 2010 09:14 AM

Carla Muss-Jacobs, RETIRED

RETIRED / State License is Inactive - Portland, OR

Hi Frank . . . yeah, that YOYO was creative. Did I make that up? I'm a genius, if I did ;-) The sweat equity can be there if it's in a "lender approved" condition. A lot I've seen aren't, sadly.

Hey Frank (II) -- a lot of potential clients don't like to hear me say foreclosures might not be worth their while . . . it's almost like a listing agent telling a seller the REALISTIC price of the home. They don't want to hear that either.

Hi Carra . . . Hmmmmmm . . . CREAM PUFFS!! Foreclosure are cream puffs that have gone stale. LOL

Hey Nick -- they lost $2,500 EM?? WOW -- that's a blog I'm ready to read. PLEASE blog!

Hi Jenna . . . I show foreclosures, and if the client has an interest, I run comps. Most times they won't comp out with the required repairs. It's just a tight, tight market. Sometimes they work out. Sometimes, it's better to buy a CREAM PUFF!

Hey Lyn -- thanks for the reblog! Cream Puffs AND donuts . . . I've gained 2 lbs from this blog post!

Hi Jennifer . . . true!! Beware beware.

LOL Charles -- never heard that one before. Frosting sure doesn't help.

Hey Tim . . . banks can take some of the bail out and/or bonus money and hire some local carpenters and make it HABITABLE at least!

Hi Andi -- thanks for the reblog! How's the morning going? The "birds eye view" of real estate. And speaking of squaking, how's those Parrots??

Jan 29, 2010 09:31 AM

Joan Zappa

Eagles Wings Realty - Montrose, CO

Professional treatment of our clients, brings awes

Will do, try to get to it this weekend.

Jan 29, 2010 10:07 AM

Carla Muss-Jacobs, RETIRED

RETIRED / State License is Inactive - Portland, OR

Hi Lenn . . . this is where the "do the math" quote comes in handy ;-)

Hey Patricia -- Debe is good at saying it all!! You too! Sounds too good, etc., and so on.

Hi Karen . . . under market sinks the other property values too. In running comps foeclosures and short sales really screw skew it up!

Hey Karen -- she can get a deal, and maybe she can get a deal on paint, flooring, drywall (a lot of holes in foreclosures for some unkown reason ;0), shingles, nails . . .

Hi JL . . . seems to be a common thread, they aren't that good of a deal! You have to do the work yourself, or hire out. Contractors don't come free either.

Hey Bob -- thanks for the reblog! A good deal does "pencil out"

Hi Michelle . . . Congrats. Yeah, some of those deals get snapped up because they are few and far between. I'm glad you were successful!! Were there other offers?!? Just curious. Yeah, you never know what you find ... rehabbing is like exploratory surgery!

Hey Nick -- I'll check it out!!

Jan 29, 2010 10:18 AM

Andi Grant

310-508-4354 | FirstTimeHomeBuyerRealEstate.com - Los Angeles, CA

Helping 1st time buyers and home sellers in LA!

LOL re the bird's eye view - hehe! This was a great blog and congrats on the feature!

Jan 29, 2010 10:24 AM

Michelle Gibson

Hansen Real Estate Group Inc. - Wellington, FL

REALTOR

Carla - Excellent blog for buyer's! The cost of appliances and repairs can add up quickly.

Jan 29, 2010 11:12 AM

Kerry Jenkins

Prime Properties - Crestline, CA

Yes, many buyers see foreclosures as having a big FREE sign on them, when they require so much work sometimes to make them habitable. HOwever if you have the money to put into it you do get near built in equity.

Jan 29, 2010 11:36 AM

Carla Muss-Jacobs, RETIRED

RETIRED / State License is Inactive - Portland, OR

Hi Andi -- thanks again!

Hey Michelle . . . It does add up quickly.

Hi Amy -- money is a plus. What I'm seeing it if a buyer spends the money, it will be about the same as if they bought a turn-key property. I think the equity is a wash in this local market, for the moment.

Jan 29, 2010 01:57 PM

Christine Donovan

Donovan Blatt Realty - Costa Mesa, CA

Broker/Attorney 714-319-9751 DRE01267479 - Costa M

Foreclosures may not only have a lot of repairs but also a lot of competition to purchase because many people want the "great deals."

Debe - Why would you have an issue with Realy Trac? LOL

Jan 29, 2010 03:30 PM

Wayne B. Pruner

Oregon First - Tigard, OR

Tigard Oregon Homes for Sale, Realtor, GRI

One of the main attractions for some people is the belief that they can make money from some ones misfortune. It's basic human nature.

Jan 29, 2010 03:59 PM

Debbie Walsh

SHAHAR Management - Middletown, NY

Hudson Valley NY Real Estate 845.283-3036

Such good points! Everyone wants a foreclosure because of the price being so low but is it worth that $100,000 as you say? I totally agree but some just don't want to listen.

Jan 31, 2010 10:11 AM

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