Foreclosures are still hitting the market in the East Texas area, not as bad as the beginning of 2009, but they are still appearing. Some forecasters are saying that about 20% of the mortgages are significantly behind and they believe there is another wave of foreclosures coming along this Spring.
Though there can be some bargains out there – the road to buying a foreclosure or distressed sale is pitted with potholes! There are a number of myths being propagated on television and other media that I want to address.
MYTH #1 - You need to subscribe (and by subscribe I mean pay for) to a foreclosure service to get the latest foreclosure listings. In our area, most all the foreclosures are listed with real estate agents and are on the MLS. So web sites such as mine, which updates each day, will show the newly listed foreclosed properties for free faster than any of the national aggregators who are only after your money.
MYTH #2 – I can get a good bargain! Well, the answer to this one is “It Depends”. There are a number of things to take into consideration. First, it might look clean and nice when you walk through it, but there is a higher potential for latent defects in a foreclosed property. We often never really know how long a property has sat vacant before the house comes on the market, sometimes it is several months. Homes are meant to be lived in with all utilities on. When the utilities are off and systems are not working, things begin to deteriorate. Gaskets dry out, freon leaks, things rust, interior cracks appear or paint starts peeling because of no climate control. The previous owners (the ones who lost the home to foreclosure) oftentimes sabotage the home by flushing rocks down the toilet, pouring caulk or mortar down the sinks as well as the more obvious vandalism of taking everything out that they can possibly resale. The list goes on and your imagination can run wild with things we see that have been done to foreclosed homes.
MYTH #3 – They will be so happy to get my offer they will jump right on it! Negotiations can take several days because there is usually no one person who has the authority to accept an offer. Getting a fully executed contract that your lender will accept can take 7-14 days so there are extended escrow periods. Some companies are also pricing their foreclosed properties significantly below market value to elicit multiple offers in the hopes of ending up with a pretty fair market price. It may take days for them to decide which offer they want to counter much less accept as written. I have not heard of any lenders accepting more than 15% off of the asking price – many go for pretty close to asking price if not more than the asking price!
MYTH #4 – Short sales can be a really good bargain! Short sales are when a buyer is underwater or upside down on their note. In other words, they owe more than the home is worth. Rather than walk away from it, they work with the negotiations department at their Lenders and they offer the home for sale at a reduced price. The Lender agrees to work with the prospective buyer and accept the lower price in lieu of foreclosing, which is a costly process to the Lender. What we are seeing happening, is the Seller and Buyer agree on a price, the Buyer gets inspections and starts their loan process and then the Seller’s Lender starts stalling. Best case scenario is the buyer could end up homeless if they sell their current home in anticipation of buying the Short Sale. Worse case is no closing at all. I have had it happen that we get almost to closing and someone further up the chain of command pulls out of the deal. The Buyer is left with all of the expenses they have already paid, usually upwards of $1000 and no house to buy! There is no one to appeal to – the deal is over. I don’t even get involved in short sales and will not allow any buyer to get involved in one if they will have no place to live if the deal falls out.
MYTH #5 – They will make repairs to the house! Most of the sales are “As Is”. The owners will often not do anything to the house other than basic cleaning or make ready. I have had clients have them under contract and them be in a condition that it won’t meet the Buyer’s Lender underwriting guidelines. In other words, they need too much work and the new Lender doesn’t feel comfortable lending on it. I even had one tell our client, “We know you are getting a good deal, and we know you will do the work to make it a great property and it will be worth way more than it’s worth now, but we don’t feel comfortable loaning money for it.” I have one now the septic system failed inspection and fortunately it will only be a couple hundred dollars to repair, so my client are paying for it because the Seller wouldn’t and their Lender requires it. We have to wait until all lending contingencies are met then schedule the repair right before closing because I don’t want my client spending money on a house that isn’t hers.
MYTH #6 – All Foreclosures are alike! This is the most frustrating thing about the whole foreclosure business – no two companies treat their foreclosures the same!! Every contract seems to be a different process. We just tell our clients to hang on for the ride! Some will make good deals, some will counter low offers and some won’t respond at all until you get close to their “magic” number. Then the actual escrow process differs for each one. Some will pay for a Seller’s Title Insurance Policy and some won’t, some dictate which Title Company to use, some will pay for Buyer’s closing costs and others won’t, some will provide a Home Buyers Warranty, some want you to do inspections before making an offer and some will automatically give your clients a 7 day inspection period. You definitely have to read the fine print of their special “Addendum” which overrides the Texas promulgated purchase contracts.
SUMMARY
Buying a foreclosed or distressed property can be a good deal if you go into it with your eyes wide open and you are not in a huge hurry. Expect the unexpected and know you are going to be getting a flawed property and oftentimes repair surprises for the first several months you own the home. For the latest information, a FREE list of the foreclosures in our area, or to consult with a professional, just give us a call!
You made some good points there. I did a search on the topic and found most people will agree with your blog.
I have seen some crappy posts but this one really impresses me. Good work!
Finally, some local information on what is actally going on with foreclosures in the Tyler/Smith County area. Some great warnings about the process. I’ve been watching the infomercials on tv and thought it was an easy thing to do. Thanks for the great article!
I enjoyed the article and thanks because of posting such valuable info squeeze of all of us to grasp, I institute it both usable and resourceful and I graph to pump it as down as I can.
Thanks for publishing this it was helpful for a paper I am right now writing for my thesis. Thanks
I really liked #6. Your absolutely right, all foreclosures are not alike! I love Tyler Homes
It’s an interesting view for sure and I appreciate it so this is a little something for all…
It’s better to keep your mouth shut and give the impression that you’re stupid than to open it and remove all doubt.
Ciao, I found this blog simply by gaffe i felt pointed Google for opinion just like this particular when I stumbled after your current blog, I must recommend your current site is extremely impressive I slightly dear our appear, dr agatston fantastic!. I don’t have the best time this second in order to wholly study your current web yet I need bookmarked your guitar and also signed up for your RSS feeds. I will be packages each day or two. belief in a super spot.
Awesome Data . Can you mind merely refer to the following article inside my web site. Anyone with a web page will obviously take advantage of the credit worthiness
What a great post. I really enjoy reading these types or posts. I can’t wait to see what others have to say.
Not long ago i found your site submit and also have already been studying along. I have come across numerous strange feedback, but generally We firmly trust what the various other commenters say. Experiencing so many wonderfulgreat reviews of this site, I thought which i should also jump in and tell you that I must say i liked perusing this article. I really believe this may help make our very first remark: “I can see that you have built several genuinely exciting factors. Not really a lot of people might truly think about it the way you merely do. I am actually impressed that there is so much about this matter that is bare and you achieved it so well, with so much school!inch
I am extremely impressed with your writing skills and also with the layout on your blog. Is this a paid theme or did you customize it yourself? Either way keep up the nice quality writing, it’s rare to see a nice blog like this one these days..
Thank you for the nice comments about my blog and web site design. It is a totally customized site that we designed ourselves. I try to make it user friendly for anyone searching for real estate or needing more information about our market.
Hey, thanks for the great article. Honestly, about five months ago I started using the internet and there is so much nonsense out there. I appreciate that you put excellent content out that is clear and well-written. Good luck and thanks for the great tips.
Really liked your post. Found the post by way of bing. The real estate market is the only element that will change the overall economy. Particularly in Nevada.
Many thanks for disclose incredibly wonderful informations. Your word wide web is great.I am impressed by the information and facts that you’ve on this blog. It exhibits how very well you realize this topic. Bookmarked this approach page, will arrive again for much more. You, my buddy, amazing! I found just the information and facts I currently looked in all places and just could not locate. What a perfect website. Similar to this website your webpage is 1 of my new preferred.I such as this info proven and it has given me some kind of inspiration to possess accomplishment for some cause, so maintain up the good function!
Hi there, I found your blog via Google while searching for a related topic, your site came up, it looks good.
Your blog is so informative … ..I just bookmarked you….keep up the good work!!!!
I really enjoyed reading this. I think I will take a look through your other posts!
Thanks for the blog info. I’d like to subscribe to your RSS
I follow your web site for quite a extended time and genuinely tell that your articles always prove to be of a high value and high quality for readers.
Hello,I love reading through your blog, I wanted to leave a little comment to support you and wish you a good continuation. Wishing you the best of luck for all your blogging efforts.
Well what can I say? great post and I completely agree with you on all points and I am thinking about adding a link on my blog to your blog post because its that good.
clever post! I believe that benefits me well. Answers a few questions for me. Thanks!
I’ve got to say that this was a solid read. I actually felt like I’ve learned something new and exciting! Thank you so much.
This a fabulous post and may be one that should be followed up to see what are the results
A partner e mailed this link the other day and I will be eagerly waiting your next piece of writing. Carry on on the top notch work.
Great info. This just what I’ve been looking for. I know a few other people who’ll find this useful as well so, I be sure to pass this along to them as well. Thanks again.
**; I am very thankful to this topic because it really gives up to date information :–
Thanks for the info. Very good post!
Very neat article. Awesome.