Many times when I meet with a buyer for the first time, the topic of foreclosures come up. These can be great deals, but you need to beware of hidden repair costs, and the competition involved. I know because I used to list foreclosed homes for banks, and here is some realistic insider information you need to keep in mind.
Usually when you find a foreclosure listed, it looks like an amazing deal because it’s priced lower than the others in that neighborhood. Then you start adding up the costs associated with the house being neglected, and even after doing that it still seems like a good deal (especially if you can negotiate with the bank to take a lower price). But, now you need to consider the hidden repairs. Because a foreclosure results in the homeowner not paying their mortgage, typically they wouldn’t have taken care of normal maintenance items because they aren’t able to afford it.
For example, the HVAC system is one thing that I find is the most neglected. If you decide to buy a home in the colder months…November-April, many times the inspector cannot turn on the A/C to determine it’s functionality. Assuming the homeowner couldn’t afford general maintenance, there is a risk of the unit not being functional. This could cost you thousands of dollars to replace and you wouldn’t know it until you turned the A/C on that first hot day of summer – and that is not the ideal time to find out your A/C doesn’t work. And if you’re thinking your home warranty will cover this, think again. Home warranties will only cover units that have been working properly when the home was purchased. So if you turn it on the first time, and it doesn’t work, your home warranty will NOT cover it.
Lastly, with foreclosures you will usually have competition. Because they are priced “below market”, they generate more interest, and so you have a higher possibility of bidding against another buyer that might have cash or be willing to pay more. So instead of negotiating the price down with a motivated seller without competition, many times you will pay far more and maybe end up at the same price you would have negotiated with a non-forclosure home sale.
However, don’t get discouraged! If the things I have been discussing are not too intimidating, then a foreclosure might be for you. There is a lot more information on Foreclosures that I haven’t covered, but if you want to learn more specifically about how they work, contact me at greg@chateauproperties.com, also you can call me at 615-538-7005.
To search for foreclosures, all you have to do is visit our mapping search page at www.chateauproperties.com/mls-search and the currently available foreclosures are mixed in with all of the others. There aren’t any magic lists of foreclosures that an agent has access too. Happy House Hunting!
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