Virginia Beach Real Estate: 3 Tips For Buying Foreclosed Homes

Dave,  nice post - simple and to the point.  There are a decent amount of bank owned properties here in Philadelphia, but mostly in the 250K and under category and lot 100K and under.  We deal with some investors who look to purchase these types of properties as rentals.  Can be a little scary for homeowners being that it is as-is and the other complications involved although one of our homeowner clients picked up a beautiful bank owned property that did not need too much work - was a rarity !

I agree with the Somers' post - that REOs in good shape are a rarity.  Can I add in a couple of caveats here Dave?

The typical buyer misconceptions about foreclosures are important to watch out for as they relate to  property conditions.   Buyers do believe that they should make low offers based on condition - but the bank presumably has already priced according to the condition, so they are not always willing to take a second discount - IMO bank negotiability depends greatly on how long the listing has been hanging around.  A good Realtor will be able to tell if a REO is simply overpriced, but some are fairly priced and buyers should be realistic about how successful their offers might be in each individual circumstance.

I also would beware the term "sweat equity" when speaking of foreclosures in bad condition.  Innumerable hopeful buyers believe that they can purchase something like that at a supremely low price (based on condition, naturally) and then fix it up themselves over time.  In most cases that is not possible, because of the risk involved to a buyer's lender.  Rehab loans are an option, but they tend to require a set of licensed contractors and lots of recordkeeping and accountability along the way.

Finally, those subscription foreclosure search services are often out of date and I would recommend that buyers contact a Realtor directly for accurate lists of local foreclosures.  A good agent knows how to mine their MLS for those properties, and the client doesn't have to give up their credit card number for it either.

A very timely post Dave.

Dave,

    I have inspected a few foreclosure properties here in the Virginia Beach area and I thought I would share the experience from the inspection perspective.

    When people hear foreclosed, the picture of the trashed house, holes in the wall and a dead cat in the back room comes quickly to mind. Well, although I'm sure it's happened in the past, I have yet to find any dead pets. In fact, most foreclosed homes inspect just as well as other properties. Cosmetically, there may be more problems, by as far as the house structure and systems, I have seen little difference overall.

   The greatest difference I have seen is scale of problems. As you mentioned above, a property that was foreclosed, the previous owner did not pay much attention to the maintenance. Thus if the property had a roof leak, the resulting water damge may be more severe as it has leaked over a longer period of time.

  My point, just because a property is 'Foreclosed", does not mean it's a bad property. I have seen some very nice foreclosed properties and would never have guessed they were foreclosed unless I was told. These types of property can be a great value to a buyer and more people should take advantage of them. It is good to see an agent who isn't "scared" to show a foreclosed property.