Foreclosure in Redmond>Question Details

Betsy, Other/Just Looking in Renton, WA

I've been told that foreclosures are the best value for me as a first time home buyer. T or F?

Asked by Betsy, Renton, WA Wed Apr 30, 2008

I want to live in the Seattle Eastside area.

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18
It is a comon myth that Foreclosures are always a great deal and buyers should only look for those!
Many First time home buyers these day do not have a lot of cash for a downpayment and therefore probably not for any repairs that many times are necessary to get the home financed that the banks many times will not do. Also, by the time the bank has the property back after no investors bought it at the sherrif's sale, they are many times deep into the equity and not always are willing to just give the home away. You might have a little better luck with pre-foreclosures and short sales. Short sales could be very complicated and drag for a long time, but the banks do not want the houses back and are willing to take less than what's owed and prevent the costly foreclosure. The deals are out there, no matter if it's a foreclosure, short sale or a regular home sale, so I advice not to eliminate the rest of the homes, since many times there is a great deal that is not a foreclosure you might miss.
Web Reference: http://RealEstatePuzzle.com
4 votes Thank Flag Link Wed Apr 30, 2008
Many foreclosures are owned by people who have little equity in their homes. If there is a lot of equity, there is more room to negotiate. If there is not equity, the only party to negotiate with is the bank in a short sale. Short sales require patience and the ability to weather ups and downs. Answers will be unpredictable and schedules will be challenging.

If you find a foreclosure property and the seller has a good equity position, there are some possibilities for good deals.

Also, check into bank owned properties. These are properties where the foreclosure process is complete and the bank is the seller. Bank owned properties are usually priced competitively.
2 votes Thank Flag Link Wed May 7, 2008
Deborah Madey, Real Estate Pro in Red Bank, NJ
MVP'08
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I don't believe so Betsy. First of all, there isn't a lot of foreclosure inventory in the Eastside to pick from. Second, if you do find something you'll be competing with investors who have a lot of cash and can probably make stronger offers than you can. Finally, it's a misconception that banks give their repossessed homes away at bargain prices. These homes are appraised and generally listed at near market value. Just tell you agent to get into the entire MLS database and find you the best buy. If you limit your search to foreclosed homes you'll be missing a lot of opportunities, perhaps the best ones.
2 votes Thank Flag Link Thu May 1, 2008
It depends on a lot of factors. First of all they are often very difficult transactions to actually get closed. Often first time buyers are working with limited cash to close so if there are any "hick-ups" reserves to deal with problems are limited. Most often homes in foreclosure have not been maintained as well as others so there may be a lot of work necessary to bring the property up to an acceptable standard. If you are working on a "short sale" transaction the time frames for approval may be daunting. There may be costs that don't appear until the end of the so unless you know the process or have a realtor that does, it can be challenging. I'd say do as much research as possible and don't get attached to a house, look at everything objectively and investigate everything. Thanks for asking.
2 votes Thank Flag Link Wed Apr 30, 2008
Generally speaking, false. I agree with most of the comments by the other agents here. For most first-time buyers the process and potential pitfalls of the deal can be depressing. Foreclosure sales are for the experienced real estate buyer or the professional investor that have no emotional stake in the outcome. As previously noted they are usually in poor condition and can need a significant amount of repair.

If you feel you have the financial wherewithal and emotional fortitude to look at foreclosures, be sure that the agent that represents you is a real specialist that works exclusively on those types contracts.
Web Reference: http://www.HomeHounds.com
1 vote Thank Flag Link Tue May 13, 2008
False. Foreclosures sometimes are a good value. Sometimes they're not a good value. But certainly not for a first-time home buyer.

An analogy: "I've been told that the Boeing 757 is the best plane for me to fly as a novice pilot. T or F?" Well, the 757 may be the right plane to fly for a 2,500 mile trip. (It has a maximum range of 3,395 or 3,900 nautical miles, depending on configuration.) But it wouldn't be the right plane to fly between Washington, DC, and Richmond, Virginia, or between New York City and Tokyo. So, under the right conditions, it's the "best" plane. But for a novice pilot? No way.

Same here. As a first time home buyer, look for a good value and a smooth transaction. That means avoiding foreclosures and short sales. There are plenty of good "traditional" values out there.

Good luck.
1 vote Thank Flag Link Tue May 13, 2008
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
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I don't agree that foreclosures are the best value for you as a first-time homeowner. In the pricier neighborhoods, foreclosures & short sales are not readily available typically. Because these folks manage to scrape up enough money to get out of trouble. You should go to a sale at the steps of City Hall with someone that has done them, and can explain the process - pros & cons - to better understand the process. Everyone else is getting the same pre-foreclosure list as you.

I'd suggest instead to pick up a property that is in a short sale. I know a CPA and that's all he does, short sales. I don't understand why they offer realtors classes on how to do short sales - unless that is what they want to focus on. You just can't succeed in foreclosure or short sales if you don't dedicate yourself pretty much full-time. There are too many nuances, and now state law changes to these types of sales and dealing with the bank, proper language in the Purchase & Sale.

My past experiences in short sales have been very profitable & reasonable - because I worked with the CPA as a team, to get them. So if you have a team approach with solid experience from team members, that is the only way to make money on these type sales. Or, work with an attorney in this area that provides you leads, with an agent that knows the area, and get a thorough inspection so you know what you are in for. You can't just do one or two a year. Good luck with your efforts!
1 vote Thank Flag Link Wed May 7, 2008
Buying a foreclosure can be a fortune or devastating experience. At the end of March 2008, I & a couple of my buyers closed one of these transactions. We were keeping our eyes on this particular property, until it got to a price were they were willing to make an offer.

I've always recommend inspections and enough time to do them, and here there was no exception; because, while the property had a great buying price it didn't mean it was a great house. My clients, at their option, waved the inspection. Fortunately for them, until now, they have only spent about $ 1,200.00 to make it habitable.

While this was not a devastating experience, it is extremely important that you as a buyer understand the disadvantages of buying a foreclosure. These institutional sellers want to sell their properties at standard market price with out the standard advantages. A private seller, most of the time, is willing to renegotiate the outcomes of the inspection and a few other items. With foreclosures, you even give up the right to complain to anybody for any minor or major wrong item with the property, and this is were the money spent in your inspections is well justified.

You should be willing to loose the cost of the inspection instead of loosing a more significant amount. If something doesn’t make sense get questions answered. Realtors are not law practitioners, but if your question involves legal advice she / he should let you know to consult an attorney.
1 vote Thank Flag Link Wed May 7, 2008
I personally buy foreclosures as well as buy them for customers. It is a tremendous amount of work to find a good piece of property and when you do you will be in competition with other investors, some who are as smart as you are.
I agree with not limiting yourself to just foreclosures, but I would at least look at them alongside the other inventory out there.
Web Reference: http://www.shopprop.com
1 vote Thank Flag Link Tue May 6, 2008
I'd say false. Better for investors, as people often mess up the place when going into foreclosure and there are other obstacles as well.. Also they didn't have money for maintenace items near the end.

First time buyer "bargains" may be later in the season...say October. But I wouldn't recommend strapping yourself with a foreclosure property as your first "home". Get something you will be happy living in, in a place you really want to be for awhile.
1 vote Thank Flag Link Wed Apr 30, 2008
Betsy, you may be able to get a great deal on a bank owned property. But remember, the property is being sold in its present condition and there is no negotiating repairs. Be sure to get all of the inspections you can, because you'll need to know the upfront costs to make your own repairs. Good luck.
1 vote Thank Flag Link Wed Apr 30, 2008
Hi Betsy -

Not always is my answer. I have seen some great deals on foreclosures, but that isn't the whole story. I have found that many bank owned properties have big deferred maintenance issues and also in many cases are not priced accordingly. There is no big discount for buying a bank owned property most of the time. In fact, they can cost you more at times if you aren't careful to avoid all of the loop holes.

As a first time homebuyer, I definitely understand that getting the best deal is probably what you are looking for - just make sure that you have someone guide you through the foreclosure maze - one tip from me: make sure that you have the form 22k filled out so that all the utilities are paid prior to the property becoming yours (so that you aren't stuck with a giant water bil, etc.).

Honestly, I am seeing better discounts from builders for a brand new house vs. some of the banks for homes in need of love.

Good luck - right now is a great time to be a qualified buyer!
1 vote Thank Flag Link Wed Apr 30, 2008
Betsy,
You have a lot of opinions here so I will just throw in my two cents. It depends on what stage of foreclosure the home is in. If the seller is facing forclosure, they may be willing to negotiate a lower price with you. If the home is already foreclosed on and owned by the bank, they want to get the most money for it similar to a seller not facing forclosure. So it is a mixed bag. The bottom line is that everyone wants to get as much as they can for a home. You on the other hand want to find a home you love, whether or not it is a foreclosure or not.
0 votes Thank Flag Link Sun Jun 8, 2008
Depending on your definition of a good value?
Work with a real estate agent( short sale or foreclosure)that knows what he/she doing. If it;s a short sale; a complete package is a most. Litigation department don't have the time to deal wth un completed package. Make sure you know the true condition of the property ( most short sale are in pretty good shape at least here in Chicago, Il) so it could be communicate to the litigation dpt. by whom ever handling the negotiation with the agent . One number that you really need to know is the BPO.
Broker Price offer. The Lender and the investor do pay attention to this number.
Good luck
0 votes Thank Flag Link Wed May 28, 2008
Really it depends on the property. I've sold foreclosures, short sales, HUD auction homes etc. Not all are great investments. My advice is to find something in your price range that has good appeal for resell and is in an area that will appreciate well. If it happens to be a foreclosure that has some equity in it already, great!
Web Reference: http://www.kalebkunz.com
0 votes Thank Flag Link Thu May 22, 2008
Betsy - That's a loaded question. Foreclosure is probably not your best option but a bank owned property might be. If you truely are looking in Renton there are a ton of good deals to be had including pre-foreclosures, short sales, bank owned and the straight resale. You should look at all of your options.
0 votes Thank Flag Link Thu May 22, 2008
Not true, A home that is exposed to the market correctly will always go for full market value. It is true that a REO (bank owned) home could be lower than other homes on the market, but the reason for the lower price is probably the condition of the home. A good listing agent will get full market for a home in any market. In the Sacramento area we are seeing multiple offers on homes that are priced correctly. I currently am specializing in listing short sales and we are even seeing multiple offers on those listings as well. Like a said, a home that is marketed correctly will go for full market value. It is your own perception of what is a good deal.
0 votes Thank Flag Link Tue May 13, 2008
Depends upon your situation - and risk level. Foreclosures CAN be incredible values, but they can also be risky, because you are usually walking into a home as-is. So, there may be hidden costs that are not disclosed to you. Are you of the personality willing to sacrifice security for cost?
0 votes Thank Flag Link Thu May 1, 2008
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