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So, You Want To Buy A Foreclosure?

By Carol Zingone

Real Estate Agent with Berkshire Hathaway Home Services Florida Network Realty BK 3030920

November 11, 2010 10:49 PM

Many buyers are excited to consider purchasing a bank owned foreclosure (or REO) property.

Many of these properties are great deals, regardless of the condition, for the more experienced investors. Some may require a bit of work (usually a good 203 loan property).

There was a recent foreclosure my buyers were interested in: great subdivision, priced at $125K, for 3 bedroom, 2 bathroom with about 1655 square feet.

The biggest detriment? It had no kitchen. No cabinets, no counters, no appliances at all. In my buyers' mind, this was perfect, a blank slate to start from.

Many buyers are also tempted to offer less than listing price, thinking that no buyers will offer full price or better. That is a dangerous way to think. It's important to have your Realtor check for foreclosures in the area in similar condition to see what they sold for in order to prepare a proper offer if you really want the house.

This home was priced to generate multiple offers, which it did.

SO, how much did it sell for?

Listed at $124,900, and 18 days later, under contract to a cash buyer for $146,500.

If you want to purchase a foreclosure, you need to do your homework first!

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Dennis Neal

RE/MAX, Big Bear - Big Bear Lake, CA

Your Home Sold in 21 Days or We Sell It For Free

When we get requests for list of foreclosures we always ask one key question. "Are you only interested in foreclosures or ANY property that represents a great deal?"

Many times in our market of Big Bear Lake, CA the foreclosures have the prices driven up by multiple offers and are no longer a great deal.

Nov 13, 2010 06:44 AM

Simon Mills

Mills Realty - Toluca Lake, CA

In my market the well priced foreclosures are going so quickly that I am only working with cash buyers that are willing to close in 10-days. There is just no time to waste if a buyer needs financing as there are plenty of cash rich investors gobbling up the inventory.

Nov 13, 2010 06:48 AM

Tom Waite

Thomas Waite Real Estate Broker - Cypress, CA

So Cal-Apartment Bldg Investments

For some reason folks just this trashed out Foreclosures are the best buys.

Hopefully, the market will magically recover and deliver them from their delusions.

One can usually find a perfectly nice Normal Sale and many of them are most competitive at the same price, sometimes better.

Go figure?

Nov 13, 2010 07:11 AM

Robby Leviton

Metro Real Estate LLC - Kirkland, WA

Knowles Team

Carol, you hit it right on when you said the buyer needs to have her/his realtor do the homework for the area. I have worked with many buyers on foreclosures and work to educate them up front that for some its going to have to be full price or higher as in the example you spoke of. Others we have been able to come in quite a bit lower. The conversation with them before we even start shopping is that its a case by case process. Either way in the end they are very happy with the purchase they have made.

Nov 13, 2010 10:18 AM

Cynthia Larsen

Cotati, CA

Independent Broker In Sonoma County, CA

Carol - great post. Our foreclosures are priced better than any other kind of sale here if you compare list price vs. sold price. Short sales are second best, and regular sales are off the chart.

Nov 13, 2010 11:00 AM

Nicole Fleming

FC Tucker Emge - Henderson, KY

I had a buyer who refused to offer a reasonable price for every house we put an offer in on. He kept saying if they want it sold, they'll accept it. I tried to reason with him and give him comps to show these houses were worth more, but he didn't listen. And, yes I said "houses". We put in several offers and no takers for his horribly low asking prices. Sometimes you get those buyers who think they know everything.

Nov 13, 2010 12:01 PM

Gene Riemenschneider

Home Point Real Estate - Brentwood, CA

Turning Houses into Homes

some people define good deal as getting the home for under asking price, not a good price.

Nov 13, 2010 01:51 PM

Woody Edwards

First Choice Realty, Inc - Chesterfield, VA

A Realtor® Who Answers His Phone!

I was at an auction this week and talk to the auctioneer afterwards. He said that late Aug-Early Sept., the cash buyers suddenly appeared again at his auctions. He said they had been almost nonexistant until then. We both agreed that was a good sign as people like Donald Trump buy at the bottom and sell at the top, so, hopefully, those cash strapped buyers feel like we are at the bottom ( or maybe I'm just looking for an excuse to think it's going back up).

Nov 13, 2010 03:58 PM

Anonymous

InspectorD

REO's can be a great deal if you know what you are looking at. Most don't, including most Realtors.

They need to be inspected properly. I do them all the time. I have a solution for the lookie loo buyer that can save them some money. I've written a book to help the lookers sort the crap from the hidden bargain before calling the Pro Inspector. Find it here: https://www.createspace.com/3491450

Happy Bargain Hunting!

Nov 13, 2010 04:02 PM

#65

Kimo Jarrett

Cyber Properties - Huntington Beach, CA

Pro Lifestyle Solutions

Your illustration about a home listed at x and selling for more at y isn't indicative of the reality in today's market. Your illustration is the exception to the reality. The facts indicate that investors are buying these properties at tremendous discounts, many buying bulk inventory and reselling at wholesale or retail after repairs and if my client wanted to bid higher than the asking price in spite of my advice, it's not my obligation to persuade him to offer less.

Investors are knowledgeable and experienced buying and selling real estate regardless of foreclosures, REO's or short sales because it's their business, so most don't use a Realtor's services. There is a big difference in buying to make money or buying to live in the property.

Nic, #31, summed up this event by indicating that an investor will move on and find another property to buy so he can earn a profit rather than pay more than the asking price, especially in a declining market and an abundance of inventory to select from. Buyers are exceptional and emotional, while investors are without emotion and unattached to the property except to earn a profit, and only if the property produces a suitable profit.

Nov 13, 2010 05:04 PM

Anonymous

Peter Michelbach

Hello Carol, good advice, thank you for sharing the homework...

I lost 2 subject sales last week; Leslie #25, gave me food for tought spend time with the buyers in the office doing the research before we get in the car.

Thank you All for the inspiring post. Peter from 'down under'.

Nov 13, 2010 11:37 PM

#67

DeeDee Riley

Lyon Real Estate - El Dorado Hills CA - El Dorado Hills, CA

Realtor - El Dorado Hills & the Surrounding Areas

Absolutely Carol!!!! I see it all the time.

Nov 14, 2010 04:39 PM

Coleen DeGroff

Coldwell Banker M.M. Parrish Realtors - Gainesville, FL

Haile Plantation Real Estate - Gainesville FL

Carol - You DEFINITELY have to do your homework if you want to buy any home, but ESPECIALLY if you want to buy a foreclosure! No disclosures available means you'd best do your due diligence and find out everything you can....a few hundred dollars paid to top-notch inspectors can end up saving you lots of money and heartache in the long run.

Nov 15, 2010 02:15 AM

Lyn Sims

Schaumburg, IL

Real Estate Broker Retired

Some buyers think that foreclosures mean negotiating downward but depending on your market, that may not be true. Working with someone that knows the area well helps with a successful offer.

Nov 15, 2010 05:04 AM

Bina Yajnik

Watson Realty Corp. Palm Coast, FL - Palm Coast, FL

Hello Carol, this is great advice in today's market. We need to educate our buyers & investors. There are some excellent foreclosures to take advantage of....

Nov 17, 2010 02:25 AM

Pam Wilhelm

Florida Luxury Realty - Clearwater Beach, FL

This was a good point. But after receiving a New Builders Certification, I have found that new construction is a far better value for my buyers. I show them a few short sales and explain the unknowns and and unforeseen costs as well as the time lines that have no end in sight. Then I take them to the local builder and show them the value in energy savings, lower insurance costs, blanket warranties, and the fact that their closing costs will be paid for by the builder, and it is a slam dunk! The builders have found a way to compete in this market,, and for a few dollars a square foot more that foreclosures, they have build a new product built to 2010 hurricane standards that has an energy savings of $80/month and $180/ month savings in the summer in Florida! Many of these homes come with granite countertops and stainless appliances included in price. AND THEY CLOSE ON TIME. The commission is not bad either!

Nov 17, 2010 09:47 PM

Wayne B. Pruner

Oregon First - Tigard, OR

Tigard Oregon Homes for Sale, Realtor, GRI

This is good advice. Foreclosures can be a good buy. A good agent is an asset.

Nov 19, 2010 12:15 PM

Liane Thomas, Top Listing Agent

Professional Realty Services® - Corona, CA

Bringing you Home!

Part of our challenge is to educate our clients. They buyers believe the media that is telling them they can get a steal on a home right now, and get houses at 50% off. Our MLS provides stats with listing price vs sales price and can be very specific, zip code, city, or TG grid. It helps to show the client that homes are selling at or over asking price.

Nov 21, 2010 02:41 AM

Sybil Campbell

Fernandina Beach, FL

Referral Agent Amelia Island Florida

In our are, some Reo's stay on the market a while and then the owner is very willing to negotiate. I have a Freddy Mac Homesteps owned REO under contract now that was such a case.

Nov 25, 2010 09:17 AM

Ronald Gillis

Southwest Florida Notaries (Mortgage Notary Signing Agent) - Port Charlotte, FL

CNSA Southwest Florida. Notaries, Port Charlotte, 941-7-NOTARY

Nope, if I won the mega-million lottery, I would not purchase one. I would be hard pressed to buy property in general with all the destruction of title caused by MERS, but foreclosed homes have even significantly more troubles. Consider several foreclosure mills attorney firms that also own title companies will not insure title to THEIR OWN FORECLOSURES. That is a sign of how bad the forgeries, fraud, and false filings in court cases. These are not mistakes, these are criminal acts. And they are not a rarity, they are the norm, sad to say.

Sep 18, 2011 04:41 PM