Chris Ann Cleland of Virginia, wrote a post regarding foreclosures and buyers thoughts. What is happening in your market? Are foreclosures slowing down yet in numbers? Is your market saturated with them? Have you worked with buyers that want to offer much less than the already low price of a foreclosed, bank owned home? I would love to hear your comments on foreclosures and any experiences, good or bad.
Are Your Expectations In Line With What's Happening in the Market?
Foreclosures, foreclosures, foreclosures. Buyers can't seem to get enough of them. Why? Because they all think they are getting them waaaaaay below market value. Because that's what happened when the market was flooded with them, right? Banks took less money than regular sellers just to dump homes. Not exactly.
Let's start with a basic principle called supply and demand. When there are too many homes on the market and not enough buyers to purchase them, prices will drop to entice buyers to act. That's what was happening when the foreclosure crisis began. There were too many homes on the market for the buyer demand and not all of them were going to sell. Banks, who had zero emotional attachment to the homes, found the market value (price buyers are willing to pay,and sellers accept) much more quickly than home owners who were stuck on the idea that they had tons of equtiy in their homes. By the time some of those regular home owners came around, the banks were viewed as the bad guys that killed the real estate market by accepting less than market value for homes. Not at all true. Market value is market value. If the market were flooded with regular sales and didn't have enough buyers, the same thing would happen. Only then, people would be bad mouthing their neighbor that decided to lower their price to sell.
Now, as we face the end of 2012 and the beginning of 2013, many buyers are still stuck with this idea that banks will take less than market value. The only way a bank is discounting a house is if it needs work. And it will be discounted appropriately for the amount of work needed to get it to market value. So in the end, unless you are a contractor with the time, talent and skills required to get one of those fixer-uppers together, you aren't really getting a deal at all. Prices are going up in Northern Virginia because demand for homes is much higher than the supply. The exact opposite of the problem we had getting into this mess.
Long story short, if you bought a foreclosure in recent history (one to two years ago) you aren't going to see any ridiculous growth of equity because you bought from a bank. The house you bought would've sold for the same price, in it's same condition, no matter who sold it. And as we've stated, the fixer-uppers are only going to increase based on the work you put into them....which equates to cash out of pocket. Be prepared to wait for that growth in the market, or the equity you build by making regular payments. The days of making $50,000 in six months just because are over.
Buy a foreclosure because you want to live there. And if you are looking for a home, don't waste your time thinking there is a deal out there. The words, "If it seems to good to be true, it probably is," should be ever present in your mind, particularly in the real estate market. Banks may start list prices prices low, but they sell for the same market value as everything else comparable. And in the end, those fixer uppers can cost you more than the regular sale in good condition priced a bit higher.
Chris Ann Cleland, Associate Broker- Licensed in Virginia, GRI, SFR, Northern Virginia Short Sale Specialist. Affiliated with Long & Foster, 7526 Limestone Drive, Gainesville, VA 20155. To contact Chris Ann, call 703-402-0037 or email chrisann@LNF.com. Or you can visit her website: www.nvarealestate.net.
Header is a combination of photos from the Bristow, Gainesville & Haymarket areas, taken by Chris Ann Cleland.