With all the news about a collapse in the housing market, many buyers
are wondering if there are bargains to be had in foreclosures. Yes,
there are, but true bargains are not as easy to find as you may think.
While there are an increasing number of homes sold on the court house
steps every month, the best deals are rarely found there. And, unless
you are experienced in such sales, it's best to look elsewhere.
Many of the best deals can be found among what is known as pre-foreclosure,
that is, homes that are in financial trouble and soon to be on the
auction block. The downside, though, can be both depressing and, at
worst, dangerous. Remember, for a homeowner, foreclosure is a powerful
emotional experience, and for some prospective buyers, the idea of
taking away someone's home is more than they can stomach. Unfortunately
for the owner, however, someone will take their home; and if you are
able to structure an acceptable deal with the owner, it can be a "win/win."
Homeowners may be embarrassed or offended when approached about their
predicament, and others may interpret your offer as in intrusion into
their private lives. A few may even try to sabotage the home before
moving out. Hidden damage can cost thousands to repair. On the positive
side, if you're able to work a deal with an owner, the potential for
gain can be significant. Just be cautious and check everything possible.
Lenders are another source for foreclosures. Begin with their websites;
many of them list foreclosed properties there. As banks' inventories
grow, they are becoming more willing to drop prices. Banks never want
to be in the real estate business. If you are persistent, you may
encounter some good buys. While a lender's asking price on a particular
home may be at or near market value, most will negotiate. Doing a
little research on current prices in the area can provide you with
the ammunition to get them to lower their price. If you can show them
that the home is priced above the market and can justify an even lower
price because of repairs the home may need-many foreclosures need
substantial work to be up to neighborhood standards-and, if you remain
firm in your offer and stay in touch, you may be rewarded with a bargain
price. Be persistent, but not obnoxious.
If you plan to be owner-occupant, your chances of getting a good deal
are better. Banks have lists of potential investors that they try
to market foreclosures to, but investors never offer anywhere near
fair market value. They must consider loan and holding costs as well
as marketing and other costs. Their offers rarely compete with potential
owner-occupants who can pay a higher price because of the lack of
some of the investor's costs.
If the foreclosure market interests you, there are several web sites
and publications that list foreclosures, and you can subscribe to
foreclosure services that provide monthly updates of every property
in a specific area.