I recently heard this as a concern for many sellers today. I mean it makes sense, if homes in your area are being foreclosed on (practically every area has a few here in Orlando) and the banks are letting these homes go at "fire sale" how is the typical owner to compete? We all know buyers want the most for the least right???
There's no denying it, foreclosed homes are great deals! Many may only need minor cosmetic work like paint, cleaning and maybe some yard work. For a few thousand bucks and a little sweat equity buyers can get great discounts on perfectly good homes. All buyers have t do is compare the "cheap" foreclosure house to your house, add in a few bucks to fix up the foreclosure and they come out way ahead, the numbers don't lie.....so why buy your home??? Because, people looking for a home don't always go by the numbers!
I work with a lot of buyers nowadays; the majority of the serious buyers out there are still looking for the "finished product". They all express interest in foreclosures but once they see a few (even some of the ones in better condition) they opt to go with non-foreclosures that show better. They know full well they can get a much better price on the foreclosure and still have some savings if they fixed everything up themselves, but it doesn't matter to them.
Being a numbers guy myself I just don't get it, but nonetheless it's happening every day. Not ever letting things go at face value, I of course have to figure out why, and waste hours thinking about it, then writing about it for you sophisticated insomniacs that just can't get enough of my blogs :)
1. Emotions: Buying a home you are going to live in for a very long time is never just a numbers decision. It's a very personal and emotional decision. Not talking about the financial implications of the largest purchase of most people's life, it's also one of the largest decisions involving one's happiness. I mean who's going to buy a home they aren't 100% sure they are going to love? You're going to have to live in that home for the next 3-6 years, if you not happy living there, that's a pretty good chunk of your life! When someone walks into your front door they need to feel like they already live there. This is NOT a feeling anyone usually gets walking into a vacant, dirty foreclosure with no power on.
2. Risk tolerance: While buying a foreclosure isn't all that risky of a proposition, there is still more perceived "risk" buying foreclosure vs. a normal home. The fact that home isn't ready to move into, hasn't had anyone maintaining it for a long time, and the possibility of hidden defects caused by neglect or an upset former owner. (I'm sure some of you have heard the stories of people pouring concrete mix into toilets before being foreclosed upon!) Some people will just think of these potential problems and not be able to make the final decision to buy.
3. Perceived Discount: The main draw to many when it comes to buying a foreclosure is that you can get an AMAZING deal on all foreclosures. I'd imagine many people would be able to see through the above two reasons mentioned, but when it comes down to putting in an offer to the bank they don't realize the banks aren't giving these homes for sale and don't just accept the first offer that comes along. Many times they price their homes very competitively and are willing to wait for decent offers to come in. Many buyers out there think this market is so bad that buying for full asking price...and in some cases above asking price is a fool's error. So when a bank won't accept a price less than asking they balk. More often though the biggest factor, when it comes to price, with a foreclosure is when you get competition from another buyer. Here in Orlando well priced foreclosures are receiving more than one offer, buoying prices on foreclosed properties. Once another buyer bids higher than you, you can get yourself into a bidding war, and in this market, that can eliminate any savings offered by a foreclosure quickly.
4. Not always a deal: Contrary to common belief, just because a property is a foreclosure doesn't automatically mean it's a great deal! Banks are fallible just as much as anyone else. This is amplified by the fact that the person making the decisions on the sale of the property has never seen it, is 1000 miles away, and is simultaneously trying to sell 300 other properties. There are in fact many Overpriced foreclosures out there, and the banks don't always drop their price when they should!
So in short, sellers DON'T GIVE UP if your neighbor becomes a foreclosure! Price it well compared to other well maintained homes, go see the foreclosures that you may be competing with, and compare (with a buyer's eyes) the difference between how your home looks and the foreclosures. If your home is the "finished product" you don't have to compete directly with the foreclosures!
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