December 9, 2006 at 10:02 AM #8036kev374Participant
I know buying foreclosures is really risky because a lot of the properties are neglected and sometimes they are sold “as is”…but if I can get them at 50% of market value then I figure I will have enough room to make any required repairs.
Personally I don’t feel it’s worth dealing with the hassel of buying a foreclosure unless the price is substantially reduced like 40-50% below market.December 9, 2006 at 1:51 PM #41408powaysellerParticipant
In about 3-5 years, I think you’ll find plenty of properties 50% off peak prices. But as of now, it seems banks are very very reluctant to lower prices. There’s a bank REO near my son’s school, and it’s said Bank Owned on the sign out front since August, when they failed to sell it at auction. This house is owned by Wells Fargo. Why wouldn’t they lower the price enough to move it?
Auctions generate a lot of hype, and people end up overpaying. Plus, you cannot do inspections, and you could end up with a house requiring a new roof, new foundation, anything….. plus you need to bring a cashier’s check for the full amount. So unless you’re an investor with deep pockets, it’s a big risk I think.
I have not heard of any foreclosures which sell below market prices.
Just think about it, why would a bank or homeowner sell anything below market price? Because they like you so much?
Foreclosures will be very cheap only when there are so few buyers, that you could hardly give away a house. LIke in the 1990’s, when banks couldn’t sell their homes. Even nice homes on the beach in Laguna Niguel had to be rented out for several years, until the market turned around and the banks could sell them.
As my landlord, a housing investor says, “Foreclosures are nothing!”
Good question though!
I hope someone who has actually dealt with foreclosures can add to this discussion.December 9, 2006 at 4:46 PM #41411renterclintParticipant
PS is right on the mark. I worked in banking for a couple of years, and from what I’ve seen, the banks are not really that different from a individual seller. It depends on the state, but usually the lender is legally required to offer the property to the public prior to taking posession. The banks that I’ve worked with will not typically sell the property for less than FMV at auction unless there are issues with the property. If there are no market value bids from the public, the property becomes an REO. The banks I’ve worked for simply hire a realtor just like you or I would, and they then try to get top dollar for the property. That being said, if the loan balance at the date of foreclosure was significantly less than market value, the bank may budge over time (much like an individual seller who has a lot of equity in the home for sale).
The time to capitalize on a home heading for foreclosure is before the property reaches the point of foreclosure proceedings. If you get to a troubled borrower (who has a lot of equity in a home) just before the foreclosure process begins, you might get a deal.
For example, a house w/ market value of $500k – if the borrower only owes $300k, you can swoop in at the 11th hour and offer them $400k. They might take it if desperate enough. I’ve seen a few situations similar to this. The part I can’t figure out is why the troubled borrow does not wake up and hire a realtor earlier on (like when they get their first couple NODs). It’s not uncommon for the borrower to sit & do nothing until it’s too late. I guess they just get too attached to the home or think some financial miracle will happen. It’s sad really.
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