by Melinda Whiteman
posted October 6, 2009
Approximately seven million homes will enter foreclosure this year which could add over a years worth of inventory to the real estate market, this is great news for investors, or is it?
Foreclosure sales have provided a great boost to the broader housing recovery along with tax credits for first-time home buyers and the Federal Reserve’s buying of most new mortgages to keep rates low. Still, many homebuyers are finding that the distressed real estate market offers as many head-aches as it does bargains.
Some say: “a foreclosed property is a way for God to teach you patience.”
There are even bidding wars now on the lowest priced foreclosures. Cash-in-hand buyers are edging out first-time homebuyers who need mortgages. Banks usually sell these properties “as is,” without property disclosures which are required in conventional home sales. Short-sales can take weeks or months to hear back from lenders. Distressed property buyers also don’t know what to expect when it comes to what’s left from the previous owner’s nightmare, does the property have liens from second mortgages, bills due, unpaid taxes, court judgements, vandalism, taxes due?
The fact is that final sale prices are not always significantly lower than the average conventional home sale today.
Conventional home sellers are competing price wise with the glut of foreclosed properties, but these homes have usually been updated and renovated for today’s educated buyers. Buyers have to be prepared with secured financing either way; with distressed properties you need a thick skin as pushing and prodding bankers and loan servicers can try your last nerve. Short sales are particularly complicated and can drive you crazy. Lenders require detailed information from both buyer and seller who must prove hardship. Documents are scrutinized by everyone involved which can take months or longer.
Complicated procedures are hindering housing industry leaders from selling the large numbers of distressed properties necessary to return the housing market to normal. Foreclosures generally close more quickly than a short sale because the lender already possess the property. However, state by state judicial procedures vary and can delay a closing by as much as a year, by then, all of the appliances could be ripped out.
Bank-owned homebuyers usually must foot the bill for whatever problems are discovered, including structural defects, with no price concessions, therefore, it’s crucial that a buyer has a thorough qualified inspection performed as well as a title search. Bargain hunters are everywhere so make sure you can move fast on a foreclosure sale by having proof of funds or pre-approval from a lender, in fact, try bidding above the asking price.
After all of this, purchasing a property in the conventional market looks pretty good. So many foreclosures are sufficiently trashed that it would take just as much money to restore the house as purchasing a conventional house on the market which usually has many updates and perks. The fact is, there are still a lot of bargains to be had in the real estate market today, it just depends what kind of adventure you’re looking for. Forewarned is forearmed.
Melinda C. Whiteman is a realtor with Keller Williams Realty and can be reached at 664-1600.
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