Foreclosure Fright! Are they worth the risk?

We have sold many foreclosed homes in St Augustine and Jacksonville, Florida this year and are happy to say that most were in great condition and just a few years old.  Several of these homes sold for almost half of their original price and were in move in condition with lots of upgrades.

We're in the midst of negotiating another foreclosure on behalf of an out of state customer. After making an offer they decided to consult their son who holds a real estate license. He has never been an active agent, nor does he do business in Florida. Their son has advised them they need to ask for a repair allowance from the bank.  It has raised a lot of questions about maintenance and the integrity of the home in the buyers' mind.  Although we discussed the ‘as is' aspect of foreclosures and the inspection process, the buyers are questioning whether or not a foreclosure is worth the risk. 

Here is our opinion, speaking from experience.  Foreclosures are not for everyone and the process and risks need to be calculated with the buyers before even looking at distressed properties.  Foreclosures are not as complicated as most buyers think.  The buyer has the right to inspection, just like any other home. Yes, you incur the risk of buying the house, in most cases, ‘as is' since the seller (the bank) has no knowledge of previous damage or information about the structure or systems.  If you purchased a seller owned home often things go wrong after closing that the previous seller had no knowledge of either.  You can't be sure with a foreclosure or a seller owned home that they maintained it the way you would or the way the original builder would advise.

This is why home inspections are so important.  Using a qualified and well experienced inspector is critical.  A home inspection, if done properly, should reveal any structural and system inefficiencies that may not be visible or obvious to the buyer, if they exist.  A good inspector will walk through the systems and point out inefficiencies/damage and discuss the costs and risks associated with necessary repairs with the buyers and their agent. If there is an issue, simply walk away and get your good faith deposit back and move on.

In the case of our current buyer, the home is listed below market value.  The last two distressed properties sold at the same price point at which they're negotiating.  The last seller owned home that sold within the past six months, non distressed, sold for $100,000 more!  Do the math......if you had to replace the HVAC, the roof, new appliances and painted the whole house you are still getting a deal! The buyer has to decide if the risk is worth it. 

Foreclosures are not for everyone.  Obviously, I've oversimplified the process, but they can be very rewarding deals.  Setting expectations and assessing the risks in advance of purchasing is wise advice.

If you or someone you know is looking to buy or sell in the Jacksonville, St. Augustine, Ponte Vedra area in Florida, let us earn the business.