According to the Brevard County MLS, 30% of the single family residence sales, year to date, are marked as bank owned properties. I am not sure of the exact amount that are short sales, however, these are also dominating the market. While we may be reaching the bottom of the market, these transactions are not going away anytime soon.
With the continual arrival of new foreclosed properties in the market place, I thought it would important to review and dispel some myths about bank owned properties from my personal experience. This information comes purely from personally experience, and has not been derived from things I have read, or things that are taking place in other markets. This information has come from the purchase of Real estate Owned (REO) in Brevard County.
Myth 1) Banks will not pay any closing costs.
Banks look at the bottom line. They are holding onto a depreciating asset, and are motivated to sell properties in order to mitigate future losses. With this in mind, they are willing to do what a normal seller would do in this buyers market; this includes paying closing costs, contributing down payment and closing costs to a gift fund, and sometimes even paying for repairs.
Myth 2) I can low ball an offer on a foreclosure.
While there are many great deals out there, banks are looking to get as close to market value on their listings as possible. Before a foreclosure is listed a BPO is done, as well an appraisal. The bank has a good idea of the real market value of the property in its current condition. Also remember that foreclosures are usually listed on the low end of market value, so there may be many parties interested in the property. You may not have the ability to go back and forth with the seller. You may only have one shot to give your highest and best. Make sure your offer is strong.
Myth 3) You're the only party interested in that foreclosed property.
In many cases I have seen multiple offers on the same property. I have even seen foreclosures sell above the list price. I have also seen over 30 offers in on the same property. Granted the property was a great deal, it just shows that others are out there looking for that great foreclosure deal. Again, make sure your offer is strong.
Myth 4) This is like any other real estate transaction.
For the most part the above statement is true, however, it can become slightly more complicated. Remember, the seller you are dealing with has an oversupply of product, and an undersupply of staff. Things can take longer than expected, and have the capability of becoming slightly more complex. Most issued are solved, and most transaction close as long as all parties are in agreement. It is always best to work with people who understand the process.
Myth 5) The foreclosure property will be move in ready.
While foreclosures remain an excellent way to get a great deal on a property, there may be some downside. Many of these properties may have been vacant for months, poorly maintained, damaged, vandalized, and in some cases gutted. If the house has been poorly maintained, and there is apparent damage, it is possible that the house may not qualify for conventional or standard government financing. These properties may be excellent candidates for rehabilitation or construction financing.
While you may hear that this is a buyer's market, once you start looking, you may find that is not the case. With properly priced properties moving at a decent pace, it may take a couple of offers on different properties before you actually come to an agreement. With some outrageous deals out there, interest rates still low, and the first time homebuyer incentive is still in effect, it is a great time to be a homebuyer. Don't wait, you may just find that you missed your window of opportunity!
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