There was a time after the market crash in 2008 that up to 70% of our buyers were purchasing foreclosure properties and realizing handsome profits within a few short years. Today many buyers think buying a foreclosure property means getting a good deal, but unfortunately that is no longer guaranteed as foreclosure prices are now typically within 10% of market value.
Many real estate agents are resistant to working foreclosure listings because it can mean delayed responses from the banks, long closing times, additional paperwork, multiple offers, and frustrated buyers.
Foreclosure properties consist of short sales and bank owned properties. With a short sale the home owner is in default but the bank doesn’t own the property yet as the home owner is still in title. There is no guarantee that an offer on a short sale will be approved by the bank and often times the bank will counter the price above the seller’s asking price.
Foreclosures listings are not as common as they were after the market crash. Bank owned listings made up less than 4% of the new listings in April 2016 and short sales listings made up less than 1%. In April 2009 new foreclosure listings made up 31% of the new listings. This is good news for traditional sellers as their home prices rise and their marketing time decreases with less foreclosure listings available.
Last weekend I showed 2 bank owned properties and both were priced below market value, which was enticing to my clients, but the condition of the properties was less than desirable, and not worth making an offer on. It is not uncommon for homeowners stop making repairs on their home when they can no longer make the mortgage payment. In most cases banks will sell the properties “as is”, but in some cases they renovate them, if they believe they can profit from the improvements.
Another client of mine was adamant about purchasing a bank owned property, which we successfully accomplished after submitting 3 different offers and competing in multiple offers. The bank would not accept an offer below list price, or contingent on the successful closing of their home, and they wanted a guaranteed closing in 30 days or less. The buyers were allowed to do an inspection to make sure they wanted to purchase it, but they had to buy it “as is”.
An experienced real estate agent can help you determine if purchasing a foreclosure property is in your best interest.
Ask the Real Estate Agent is a weekly column by Cheryl Kempenich of Coldwell Banker Burnet, who lives and offices in the Chisago Lakes Area. Submit your questions to firstname.lastname@example.org. All information is deemed reliable but not guaranteed. For legal assistance consult an attorney