A Foreclosure on Hilton Head Island is a great deal, right?

A deal is a deal is a deal?  Not exactly. While it is true that foreclosed properties usually take a much shorter time to close, that they are most likely clear of any clouds on the title, and that there is no emotionality, it still remains a distressed property.

There is rarely a day that goes by that someone doesn't say "I want a DEAL, find me a foreclosed property."  I am always happy to search any category that someone wants; however, I just had a circumstance that might make that request somewhat inadvisable.

The scenario - Imagine a large home, over 3800 sq ft, that was purchased in 2005 for just under $800,000. Beautiful lot, on Hilton Head Island in a wonderful community, on the golf course, view of a lagoon, 3 car garage, even an adorable "telephone room", 2 fireplaces, vaulted ceilings in the living room and huge family room, 3 bedrooms, a huge master suite with his and hers baths, dressing room, office, loft area, Juliette balcony clad with copper, 3 HVAC systems, you get the picture.  Now as a foreclosure, this lonely home is priced below $400,000.  WOW- you should pick that right up, right?  Perhaps, but unfortunately, the home has been stripped.  The kitchen - down to the walls - is now non-existent; no cabinets, no appliances, no counters. One fireplace mantle has been yanked, all decorative hardware, intercom, security system, is gone - wires coming out of the walls, windows broken, powder room stripped, well you get the picture.

It is STILL a beautiful home on a beautiful lot. You come along and are qualified to buy in the current listing amount range.  Should you buy it since it's a 'deal'? Well, maybe not since inherently it's a large home requiring the ability to maintain it on an ongoing basis. Let's face it, you may see a Rolls Royce that is offered for only $50,000 so why should you buy a Mercedes?  Because, the upkeep on a Rolls is exorbitant and the necessity for constant attention for this magnificent machine is inherent in its very existence.  The insurance for the home will be higher, it's based on replacement cost NOT on what you are going to pay. In our area, the taxes will be based initially on the assessed market value, not on what you pay and even when the rate goes down after your remodel, the taxes will be at a higher rate. You could put in a less expensive kitchen but is that really wise with the potential future value of the home. How about heating and cooling costs? How about all that landscaping that is overgrown and the need to trim just to bring it back will require a team of professionals now; and on an ongoing basis to maintain.

Now gee willikers, you go out and look at 'regular' homes well-priced in that same price range and they seem too small, or don't have the bells and whistles.  Perhaps, but even if moderately over-priced they are probably pretty close to being appropriate for the market. 

 Foreclosures are distressed properties, that's why they're priced like that. This is an extreme case but not really that unusual. There are loads more things to consider besides the price and that it's a foreclosure.