As a Realtor working in this changed Twin Cities real estate market, I get lots of questions:
- "Is it REALLY a good time to buy a home?"
- "With all the foreclosures, there must be some awesome deals?"
- "What does mean when an offer requires bank approval'?"
The media has lead many first time buyers and investors into believing buying a foreclosure or pre-foreclosure home is a great deal. So I get the questions. Potential buyers and those on the fence often want my expert opinion if buying a foreclosed home is a good idea. Well, my answer is it all depends on the buyer.
There are awesome deals on homes throughout Anoka County. Some of these properties are foreclosures or bank-owned. Others are short sale or upside-down, where the homeowner owes more for the home than the average buyer in the market place will now pay for the property. And then there is the traditional seller or builder who has the controlling ownership of the home, is ready to negotiate and move on to their next home.
Before you jump into buying a home in the changed Twin Cities real estate market, how do you know what type of property makes the most sense for you to buy? Face it-It is hard to pass up the very attractive, low prices on foreclosed and short sale listings. But not everyone has the stomach to handle the roller-coaster ride that accompanies the purchase of these homes. So, I created a 10 question true/false quiz to help you decide what might be your best option.
Is A Foreclosure or Short Sale Home for Me?
- My ability to deal with household emergencies and repairs is limited to picking up the Yellow Pages and having a consult with Dex.
- I have a huge rainy day fund and don't know what it means to live on the edge from paycheck to paycheck.
- I cheer for the banker in Deal or No Deal.
- I expect empathy from the seller not apathy.
- I have the patience of a saint.
- I love my in-laws and vice versa that my entire family including the dog and two cats are welcome to live in their home for months on end while the deal goes through and the home is made habitable.
- I will be purchasing my dream home.
- I have expert knowledge in all areas of home construction and/or can afford to hire experts for inspecting the property prior to closing.
- I need to be assured that my family won't be exposed to lead paint, toxic mold, radon, failed septic systems, contaminated well water, rodents, insects and dirt.
- This is the biggest personal investment of my life.
So how did you do? Are YOU ready to buy a bank-owned or upside-down property?
Question 1--False. If you answered true here, you might prefer to stick to the traditional seller. Foreclosed and short sale homes are not always in the best repair as the previous owners did not have the funds or desire to keep them in good condition. Paying out of pocket to hire contractors for every little repair can be cost prohibitive.
Question 2--True. If you truly have a considerable nest egg that can be invested in the known and unknown repairs of a foreclosed or short sale home, then it could be worth the risk. However if your budget can not withstand unexpected repairs, you might want to have a better understanding of the home you are buying with a complete seller disclosure and try to negotiate a home warranty with a traditional seller.
Question 3--True. Obviously a true on this one is an indication of a foreclosure and/or short sale buyer. You understand your purchase is just business to the banker. You are in it for the investment and feelings do not enter into the equation.
Question 4--False. Anyone who expects empathy from the seller needs to avoid short sales and foreclosure homes. The banks do not care about your family, your needs or your life. It is strictly a business transaction.
Question 5--True. If you don't believe patience is a virtue and answered false here, don't even consider a short sale. Most transactions will take a minimum of 8 weeks for the purchase agreement that has been accepted by the seller to be reviewed by the bank. And when the bank finally reviews the agreement, then the negotiation begins. This process can take literally months!
Question 6--True. If your answer is false and your in-laws become out-laws after a day of togetherness, avoid the short sale or foreclosure scenario or find alternative housing prior to submitting your offer. Banks don't accept contingent offers so if your current home sells and you put in that offer to the bank, your current property can close long before even getting an answer from the bank. Traditional sellers are much more flexible with timing as they are usually in a similar situation an can empathize with the buyers.
Question 7--False. In the best case scenario, the foreclosure/short sale buyer is purchasing a property not a dream. Dreams can become nightmares when buying an AS-IS foreclosure or short sale home. If you are not looking at the property as an investment devoid of emotions, stick with the traditional seller situation.
Question 8--True. If you cannot answer true to this question, be prepared to fork over hundreds of dollars for inspections on the home prior to purchasing it. Inspections and testing can cost into the thousands if the home is on a private well and/or sewer system, if there has been water intrusion/mold or if the home's age indicates the possibility of lead or asbestos.
Question 9--False. If you need assurances about the condition of the home, stick with the traditional seller. In Minnesota homeowners are required to provide disclosures. Some inspection costs can be negotiated into a purchase agreement with a traditional seller like the well and/or septic system. Banks rarely pay for any type of inspection and buyers are often asked to agree to purchase the home AS-IS and waive their rights to a disclosure.
Question 10--False. If you answered true and this is the biggest investment of your life, as it is for many first time buyers or owner occupied residences, maybe a traditional purchase would make more sense in the long run. First time investors need to heed this warning and give careful consideration to foreclosures and short sales too. Until you can say, it is just another property and you don't have your heart and sole tied to the investment, it might be more prudent to choose the investment with the least risk.
All kidding aside, these are serious questions to contemplate. Buying a bank owned property is not the right choice for the average buyer. Dealing with a corporation where a home is just numbers on a balance sheet can be frustrating. Buying a dream shouldn't be a nightmare. The buyer alone is the only one who can decide whether buying a home that requires a bank approval is worth the risk, frustration and effort.
Featured Ham Lake Listing--An awesome deal that is NOT a short sale or in foreclosure!
If you are buying, selling or relocating to Minnesota and need help from a professional Realtor, give me a call or visit my website for a FREE Relocation Packet. I specialize in acreage and lakeshore properties in the north and east Twin Cities metro area including Ham Lake, Lino Lakes and all communities in the Forest Lake School District! Serving Anoka, Chisago, Ramsey and Washington Counties in Minnesota.