Ask Jill December 2014

Dear Jill,
I see
people getting good prices on foreclosures.
My wife and I have some flexibility to buy a second property and we
would appreciate your perspective on the upsides and downsides of exploring a
foreclosure purchase.  Regards, Michael
 
Dear Michael,
 
This is a question
after my own heart; so I’d like to take the opportunity to share immediate pros
and cons along with a few details from personal experience.  The upside very well could be you may get a
great deal on a property, sometimes 20-30% off what the true price would be of
a home not in foreclosure.  And, if at some point in the future you are
to call that foreclosure “home” you have just landed a fantastic deal on your
dream home!  The downsides, however, could
potentially be: 1) competing against investors, 2) the prolonged time the
entire process takes and/or, 3) it could cost you more than you had originally
expected.  Worse yet, it could cost you
more than the house is worth!
 
The serious
downsides are that you would be competing against investors that are often
times cash buyers and will purchase a property without inspections.  Purchasing a property without inspections for
someone who does not have a good construction resource can be often risky. Many
times foreclosure/REO homes do not have electrical power turned on so it would
almost be impossible to test any of the systems such as HVAC and electric.  The water in most foreclosure/REO properties
has been drained and the homes winterized sometimes correctly and sometimes incorrectly
so you may not have an accurate pulse if the plumbing systems are working
properly.
 
The best
way to purchase a foreclosure is to work with a realtor who has experience with
clients buying foreclosures.  This is
extremely beneficial because it’s not a one-size-fits all type of purchase.  Simply bidding on the property, you may not
be successful.  Certain properties may
cause you to even need to bid above asking price. 
 
You may or
may not know I have renovated over 50 foreclosures in the Oakwood and
surrounding areas.  Our most recent
foreclosure process on the Oakwood home of Schantz and Spirea began back in
September 2010 and took until June of this year for the property even to be
listed.  After my husband and I submitted
our initial bid, the bank came back and shared that there were 12 different
groups bidding on the same house.  They
then asked all interested parties to submit their highest and best offer.  At that time we submitted our best offer,
which was well above asking price.  It
was a cash purchase and we waived inspections.
Inspections are very critical if you do not factor in extra money for
unforeseen repairs such as electrical, heating, plumbing in order to make the
home livable.


This is an excellent question, Michael.
Should you and your wife decide to explore this option please keep in
mind you’ll need a realtor to be able to schedule showings.  Many times a local bank is preferable over a
national one and banks prefer cash offers waiving inspections.  The faster you can close on the property, the
more attractive your offer will be!  In
general, make sure you have some extra savings on hand reserved for unforeseen
repairs/maintenance, as the home may have been vacant for an extended duration.
 
Often times
clients have questions about short sales and foreclosures, let’s get to the
short of “Short Sales” in next month’s issue!
 
Please send questions you may have about short sales, home
renovating and sales to
Jill@OakwoodHomesForSale.com.
 

Written by

Yaser Aldineh - Re/Max Victory

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