As they say, your results may vary....
Cindy nailed the practical reality - Most first time home buyers are falling short to cash and conventionally funded buyers. Many won't have a shot at a foreclosure right now, except as a backup.
So for those SNL fans who remember the days of Jesse Jackson as host - The question is MOOT!
CA DRE 01775528
I don't love foreclosed homes for first time buyers. Here's why. There is this potential illusion that you're getting a great deal, but from literally minute one of the deal, you'll almost never get what you want. Banks make no repairs. They typically make no repair credits. Yes, they may have put in new carpet or put on some new paint. Anything they do is typically cosmetic and I would argue hides what's underneath. I have sold so many foreclosures and they're all a nightmare in repairs, and some of my clients actually like that!
You will also never have the history of the home, not a disclosure, not a peep of information on what went on there with the previous owner. All former stories, some enchanting I am sure, are gone to the universe forever.
If you're considering buying a foreclosed home, I have two pieces of information for you once you're in escrow: hire the best, darn home inspector you can find to tear that house apart. Then take the home inspection report you'll get -- print it out if you have to -- and find a handyman or general contractor and hand it to them and say: how much to fix all this stuff? Create a list of "must do's", "it can wait" and "wish list" fix-it items.
Make sure well within your contract's contingency period you do all this, so you know the true cost of buying a foreclosure, and go forward with the deal if you like what you see. Just don't get caught up in the fantasy. Months later when you're still chipping away at the "must do's" you'll be reminded that the foreclosed home deserves a new life, but it comes at your expense. Which may be OK for you! Good luck!
Green Box Homes
shop for homes:
California DRE #01179760
San Diego Association of REALTORS
Broker of the Year, 2011
Are you asking is it a good time to buy now or are you asking is it ok to buy a foreclosure vs. a short sale, vs. a traditional sale? It sounds like you are asking the latter so that is what I will address.
A foreclosure is a fantastic way to go. At the end of the day you going to be getting inspections done on the property no matter what you purchase so if you find that a property is in too poor a shape for you to want to purchase than you can back out. Your only loss being the cost of the inspection and your time.
If the property has a decent amount of defferred maintance or was just beat up it is a great way to lock in some profit on your puchase. Most buyers don't want to deal with the hassle of a fixer so the price is usually much lower then the cost of the repairs and the after rehabbed value (ARV). Once you fix up the home you can be sitting on a substantial amount of equity.
I personally have listed over 400 foreclosed properties for the banks and there are some specific aspects of the transaction that are very different from traditional sales so you do want your agent to thoroughly explain them too you, but ultimately it is the same as any other real estate deal...you offer someone (the bank) money they give you the deed to the property. Net result in my experience is that the buyers are very happy with their foreclosure (REO) purchase.
To me, the poorest decision is to do something significant because a realtor or someone else told you you should do it, without stepping back and really thinking if it is the right decision for you.
The reason is this - Most foreclosures generate many, many offers...it can go as high as 20-30 offers...sometimes more. The person who 'wins' this multiple bid scenario will likely be one of the highest bidders and one who is either all cash or has a large cash down payment.
Typically, first time buyers are not long on cash - and there's the downfall. In San Diego anyway, foreclosures are really off limit to the average first time buyer with 3.5%, 5% or 10% down.
The other challenge with foreclosures is they are 'as-is.' The banks don't pay for any repairs so you as as the buyer would need enough cash to do the repairs.
There's nothing wrong with going after a foreclosure - I would advise you to stay open to all types of sale - traditional, short sales, and foreclosures.
When we started in this business, we worked exclusively with buyers and a lot of first time buyers. With that said, a first time purchase is not easy on the buyer, and a good agent can make it smooth. However, you still need to explain all of the contracts and disclosures and help out with loan and escrow questions.
With that said, if a first time buyer is going to pursue an REO, then their agent should have a minimum of 10 REO transactions so they could have seen the variety of scenarios that come with negotiating with a bank.
Mark & Kari Shea
Shea Real Estate
Home Sales Specialists; New and Resale Homes
Property Valuation Specialists
Land Sales, Acquisitions & Consulting
Serving Greater San Diego
In answer to your question,... is buying a foreclosure smart for first time home buyers? depends on the home and depends on the buyers. All are different and there is no one rule.
Harold Sharpe - Broker
So Cal Homes
California Department of Real Estate Broker License # 01312992
The notion that they will lose to cash because they can offer more is ludicrous, investors did not get to where they are by spending more than a home is worth, they get there because they made smart decisions.
The poorest decision of all is to continue to rent.
BTW Kim, you are very pretty
Hector R. Gastelum
Realty Executives Dillon
Most first time buyers are better off not focusing on any specific property type and finding a home they can afford in an area they like that they love. There is so much to learn in a regular purchase & sale that focusing on foreclosures, short sales or other distressed properties. If they happen to fall in love with one, then we discuss the issues involved and decide how to proceed.
First time buyers often have to learn things the hard way, by losing out on a home or two, but I love working with them because they are usually so happy once everything comes together.
Sure! Why not?
Remember there's a lot to consider when doing such a thing ...
The property may need rehabbing. Are you prepared to do that (physically or financially part)
Are you willing to wait? Getting a distressed property offer accepted may take some time ...
Are you willing to compete for the property? There are many buyers with the same thoughts about buying foreclosures... you could find, after a long waiting period, that someone else was awarded the property....
A question I have is; why just limit yourself to just foreclosures ... there are many good buying opportunities available today ...
These are just a couple things to contemplate when venturing into such a project. I'm sure many more thoughts will follow as more replies are posted...
If you'd like more input about this subject, please don't hesitate to get in touch with us ....
-- Rod --
The Powers HomeSelling Team
Lic # 00897145
Serving San Diego Families for 30 Years!
The best thing to do is to speak with a well qualified, experienced agent who can advise you in your specific situation!