“I’m looking for a good deal!” This statement is often followed by, “I want to buy a foreclosure.” Are foreclosures good deals? Yes and no. Yes in the respect that you can often get a property at a lower price than if it was on the market in a non-foreclosure situation. I am closing on a foreclosure this week that was a good deal. The buyers were able to get a property that was only a couple of years old about 1,850 square feet at a price in the $150,000 range where it probably could have sold as high as 185,000 in a normal market.
There are truly plenty of great foreclosure deals out there. When looking you must be aware of a couple of things:
1. Foreclosures are likely to have problems that need to be fixed both cosmetic and with infrastructure. There is a common school of thought amongst real estate professionals, that if someone is not making their payments, they are probably not taking care of the property like they should. Make sure you get an inspection on the property and that you get an inspection period with a clause to opt out of the contract as part of your contract. (That’s why it’s important to use a good Realtor, like me : )
You may have to spend several thousand dollars to get the property up to acceptable conditions. The buyers I spoke of earlier are going to replace all the carpet, repaint the whole interior, and relandscape the yard. This is what they were looking for and they are going to do the work themselves. If you don’t have the money to spend or the desire to work, a foreclosure may not be for you.
Big problems such as plumbing issues, air conditioning, electrical, roof, or appliance problems could be yours to take care of as well.
2. Since foreclosures are owned by banks they may be harder to negotiate with. Banks don’t have emotions attached to a property like a homeowner does. Banks use matrixes, spreadsheets and software to decide if an offer is acceptable. There are less likely to negotiate on price and terms. There may be a little negotiating room because they don’t want to hold the property for longer than needed.
Every bank has different policies and some don’t have any at all. This market is new to many lenders and they are learning as we are how to handle the load of properties. Each deal is different and requires dilligence, patience and fortitude to get to closing.
When working with foreclosures you’ll need about $1,000 in earnest money, a prequal letter from a bank, and a good decision muscles. You can’t fall in love with a foreclosure either, because a lot of people are looking at them. Acting fast is paramount, because if you don’t someone will.
When it comes down to it, buying a foreclosure can be a “Good Deal.” You truly decide what is a good deal for you. Good deal doesn’t always mean good price, but also good terms, amenities, locations, and fitting the needs of your situation. Remember the main things to decide are, Can I truly afford this or wan’t to spend this a month, and Can I feel comfortable coming home to this house every evening?
Have a great week,
Joseph
Joseph Cortez 