noticed something during the past 6 - 12 months in the bank owned foreclosures. Have you noticed that foreclosures are being listed at market value or above market value in many cases? Have you seen homes that did not sell at a lower price when they were for sale before the foreclosure and now they are being listed for more money than the price that they did not sell for earlier? Well, if you have, you are not alone. I have noticed this trend as well.
Why is this happening? Well, it is pretty simple, actually. I think there are a couple of reason why we are seeing this happen. First of all, buyers want to negotiate with a bank for a lower price, so if the banks lists the home for more than they expect to sell it for (more than market value), the bank gets a price they want and the buyer gets "a bargain". Secondly, banks are generally not hurting. So, they can afford to sit on a property longer. Many bank Asset Managers believe that if they sit on a property long enough they will find a buyer at the higher price. In good markets, a nice home may have multiple offers and may sell for full market value.
What do you have to take into consideration when buying a foreclosure? Well, the answer is "A lot". Here is starters list:
- What are you going to do with the house when it is market ready? Rent it? or Try to sell it again?
- What will it cost to get the house ready to put on the market?
- Are there major structural issues under the covers that you don't see when you walk the house?
- How marketable is the home--either from a rent or resell perspective after you have completed rehabilitation?
- Do you and your Realtor® have the teams of contractors to do the work after you buy the house?
- Do you know where to start and what is really important to remodel to get it ready?
- How much will the home rent for when you are finished?
- Do you have your finances in line for an investment property? Have you spoken to a proper mortgage banker about investment properties (this is different than buying a home to live in--you knew that right?).