I Want to Buy a Foreclosure
I hear this a lot--especially for from first time investors. And I understand why. The thought process and assumption is, there are deals out there to be had in the foreclosure market and banks just want to get bad debt off of their books. Well, it is not so simple as that. In fact, forget the fact that there are fewer and fewer foreclosures any where in the US today, when they do hit the market, it is not what you think it should be and it is anything be "a deal".
I have been watching the foreclosure market for many years and there was a time when I was still buying foreclosures and helping investors buy foreclosures. That has several years ago. Today, we live in a Seller's Market in Greater Austin. Inventory has been below 3 months for more than 3 years. Every first year REALTOR in Austin has access to every listing and every foreclosure in the market. Because there are hundreds of first time investors and first year REALTORS who are watching for every foreclosure that comes on the market, banks know that they can sell foreclosures and sell them for more than they are worth--because first time investors and young agents don't know what I know. When the group thought is that they are going to get a "bargain" in a foreclosure, they typically rush to buy them and bid the price up from an already inflated number.
This has been true for years now. I made 10 offers on foreclosures about 3 years ago and lost them all to first time investors and buyers who paid more than those homes were worth. Way more than the homes were worth. And this is not just true in Austin, but true in many cities in Texas and probably other states as well. Banks are making a killing on foreclosures now. And they love it.
There is no way to out-smart foolish behavior except to stay out of their way. Buyers beware.