Common Mistakes when buying foreclosures discussed by Austin Realtor Perry Henderson

Most common mistakes I run into when talking with new buyers of foreclosed properties...

1. Thinking there is a huge discount yet to be had on the purchase price versus offer price.
a. Most people don’t know that all HUD foreclosures have to be market priced “by law”. This means that they’ve interviewed at least 3 other realtors, who have “highly discounted” the broker price opinion and the Government has priced the property at the bottom. In other words, it is priced it to sell in a multiple offer situation. Many properties sell above asking price due to the sheer number of buyer offers.

2. Requesting the Bank to pay closing costs.
a. Banks never pay closing costs in a foreclosure. That means no title policy, no survey, no nothing.

3. Asking the Bank to do repairs.
a. Foreclosures are always “as is”. They don’t do fixes and the price reflects the discounted amount so you can make those repairs.

4. Telling the bank you are an investor buyer:
a. This is a sure fire way to get put at the bottom of the list. Basically, the Obama money is tied to selling Foreclosures to owner occupants. In fact, a owner occupant is prioritized to be #1, even if they are the lower offer.

5. Not understanding the process a foreclosure is different between banks:
a. HUD foreclosures and regular bank owned foreclosures have totally different process to bid on the home. For example, some have a minimum bid process taking a month versus others will give you an immediate answer. Make sure you pick an agent that understands the differences.

6. Thinking that a short sale is better than a foreclosure.
a. Although you can get a good deal on a short sale, foreclosures are always better. With a short sale, it may take months just to get an answer from the bank. A foreclosure is usually a lot better answering in just days.
b. Another example is that a short sale home with two loans on it will never beat out a foreclosure deal. Simply put, they foreclosure process “wipes out” the 2nd loan so you’ll immediately see that discount.

Finally, here is a video showing an actual short sale versus a foreclosure. Notice how the short sale was $15K more (15% higher) and that it took months for them to even respond. Similiar house, same street, same floorplan.