Foreclosures > In Search of a Foreclosure Deal

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All buyers want to purchase a "good" deal. Real estate included. With the direction of how the housing market is headed, buyers are on the "alert" for such deals. Out of 10 real estate buyers, 11 say that they want to purchase a foreclosure - thinking that there must be a pot of gold at the end of the rainbow somewhere. More education and awareness are needed about purchasing foreclosure deals.

A client asked me this this afternoon, "I heard that I can buy a $800,000 house for $400,000. That's the type of deal I am looking for". I compliantly said Okay and start looking for these "deals". We pick several houses to look at. Some have missing appliances, some have signs of disgruntled homeowners, some have animal droppings all over the carpet and some have big holes in the wall. I politely tell them that since they are looking for houses 50 cents on the dollar, "these" are the types of properties they would have to consider. "Errrr...... but I need it move-in ready condition". I smiled.

Banks are NOT in the business of fixing properties - even though some may be more inclined in fixing some buyers' requests. Many times, you would expect to find properties in these inhabitable condition. "Move-in ready" condition and 50% off market value does not go hand-in-hand in this situation. When properties are "move-in ready", you would perhaps have to pay close or at "move-in ready" prices.

What really goes on behind the scenes?
Banks typically obtain a broker's price opinion (BPO) and an appraised market value. They typically compare these numbers and decide a list price for the property. Sometimes, those numbers do not vary and other times, these two numbers could have a big variance. Whatever the bank decides to list the price at, the asset manager typically knows if he/ she has listed it below market. Also, many banks let the properties stay on the market (while accepting multiple offers) for a few days. They do not just negotiate the first offer that comes in. When a property is indeed a "very good" deal, there is usually more than 1 buyer interested in the property. Hence, the bank receives multiple offers. The bank will usually give a chance to all buyers to re-submit their highest and best offer. Sometimes the bank picks its highest bottom line number and sometimes, the bank picks one contract and negotiates for more. There is not a standard practice here.

Based on my experience and my study of foreclosure properties, transactions - even at the time of listing may seem to be an attractive "deal" ie 20-30% below market, with multiple offers, properties end up selling close to "market" value. Case-in-point: This foreclosure property at move-in ready condition just came on the market in Plano TX. Listed at $269,000. Market value between $325,000 - $360,000. The bank received multiple offers and ended up closing at $320,000. It does not work this way ALL the time because there is some really good deals out there, under the radar. However, the less work that needs to be done to the property, the higher and more attractive it becomes to buyers. So, when you **think you want to find great deals in foreclosure properties, you might re-think that strategy.

Moral of the story: A good deal is a good deal. It does not matter if it is a foreclosure, or a seller who just want out of the property. As your realtor®, I would advise you not to just look in the Foreclosure department. Sellers sell for all sorts of reasons. I have seen some sellers sell at a "better" deal than the foreclosure next door.

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