February 13th, 2009 - Foreclosed Homes: Are They Really A Good Buy?
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Time and time again, I have people calling me or emailing me about foreclosed homes. I reply to alot of posts on trulia.com, where home buyers and sellers can ask questions about real estate and I find alot of people asking about foreclosures. So what’s all the hub-bub about anyhow? Are foreclosed homes a good buy or not?
I’ll provide an example. In Deer Park, there is a very nice colonial, priced at $319,000. It is a foreclosure, which means that it is bank-owned. Please note that a foreclosure is an “as-is” sale, where the bank is making no representations and is not going to do anything to rectify any problems with the property, whatsoever.
Now this nice colonial for $319,000 compares with other colonials in the area and they are priced in the upper $380,000 to $450,000. That’s a big difference.
But let’s take a closer look. This is where I like to really help potential buyers get the full picture. Now, at $319,000, this house, without getting into too many details, needs about $40,000 worth of work…that we can see. This doesn’t include any c/o (certificate of occupancy) issues or unseen problems with plumbing or heating systems.
If the asking price is $319,000 and we assume that we can purchase the property at $300,000, with the additional $40,000, plus another $15,000 just to be safe, this would put the total cost at $355,000. Since we assumed a $19,000 negotiable range on this foreclosure, lets apply that to a “normal” house for sale at $380,000. So a “normal” colonial, with only minor updates needed, would cost $361,000, assuming the negotiable price range of $19,000 (same as the foreclosure).
That’s a difference of $6000.
I am not trying to discourage any buyers from considering a foreclosure purchase. Not at all. However, the majority of foreclosure listings are still priced along with the rest of the market. When all is said and done, a foreclosure may not be any different from your average regular listing.
A number of issues should be understood by any buyer who considers purchasing a foreclosed property. Should you have any questions, please feel free to leave a comment or contact me directly at 631.831.9048.
(c) Copyright, 2009 www.tommcgiveron.com
By Thomas McGiveron, Licensed Salesperson
February 13th, 2009 at 8:01 am
Hi there,
I looked over your blog and it looks really good. Do you ever do link exchanges on your blog roll? If you do, I’d like to exchange links with you.
Let me know if you’re interested.
Thanks..
February 13th, 2009 at 3:45 pm
[...] Leedra wrote an interesting post today onHere’s a quick excerptIn Deer Park, there is a very nice colonial, priced at $319000. It is a foreclosure, which means that it is bank-owned. Please note that a foreclosure is an “as-is” sale, where the bank is making no representations and is not going to … [...]
April 12th, 2009 at 11:04 am
You mention c/o (certificate of occupancy) issues as a potential problem with houses sold “as is”. When a buyer purchases a property that has missing c/o’s (e.g., for a bathroom in the basement) what could be the price tag for resolving the problem? Is it just a matter of paying for the permit after the purchase or does it get much more complicated? Would you recommend backing out of the purchase if c/o’s are missing or is it just another negotiation point that just needs to be appraised?
April 13th, 2009 at 1:00 pm
With attorneys it gets much more complicated. Simply getting a c/o is not the issue. For instance, if there’s a bathroom in the basement, but towns don’t allow baths in basements, then getting a certificate of compliance for that bath is impossible, yet the buyer took on the liability of paying for a home without proper c/o’s. So my answer would be to definitely consult an attorney about this type of issue. With regard specifically to a short sale (as-is) purchase, a c/o issue is between the seller, seller attorney and buyer and buyer attorney. UNLESS, the bank that’s funding the purchase (assuming conventional financing) would not fund the loan with NOTICEABLE c/o issue(s).