Foreclosure in Katy>Question Details

Halley S., Home Buyer in New York, NY

What are the benefits or drawbacks to expanding my home search to include FSBOs and foreclosures?

Asked by Halley S., New York, NY Mon Apr 23, 2007

How does the buying process for foreclosures or FSBOs differ from homes sold by agents?

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Focusing on Foreclosures – I personally think everyone who drops this “f – word” instantly goes to the AFC category (AVERAGE FRUSTRATED CHUMP). Why? Because everyone wants to get a deal and when they see that f-word, it drives a mad selling frenzy. There are several “buy foreclosures” TV ads going so why would you think that getting 20-30 people bidding on the same property is going to get you a great deal. True story – Guy with 750 credit score dropped 15 offers in a row with 20% down for government foreclosures at above market price. Each one had more than 5 offers on the property the first day it was on the market. All they did was drive up the price which was at market value to begin with. To make matters worse, depending on the bank owner, they won’t give you a response for a month whether you get it or not. His f-word record 0-15. He now uses another Perry approved system - Stopping at any home with a big construction container in the yard and see if you can buy it before it hits the market. Perry’s rule - The only way you make money in foreclosures is to contact the bank directly and become best friends with the REO manager. Then you get them before they see the market. I have at least 5 other ways to make better use of your time and get better deals. We’ll save that for another time.
1 vote Thank Flag Link Wed Sep 5, 2007
Not all agents are well versed in foreclosure. Working with FSBO's can often be a more challenging transaction. Working with a FSBO seller now who becomes irrational and emotional due their closeness to the situation and property. The same person would probably view other transactions objectively, but loses sight of that when it comes to their own home.

An agent working w/ foreclsoures needs to understand the process, be knowledgeable about title, be aware of other potential liens, the challenges and time constraints on clearing clouds on titles and patience.

An agent working with FSBO's needs to be part armchair psychologist, have excellent people skills, and lots of patience. while some FSBO's will conduct a transaction like business, it is not a realistic expectation. Even stellar agents have difficulty detaching themselves when selling their own home. There is not criticism intented here. Our homes are personal to all of us (most of us?) and this poses a unique challenge.
0 votes Thank Flag Link Wed Sep 5, 2007
Deborah Madey, Real Estate Pro in Red Bank, NJ
MVP'08
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Hey Halley,

I don`t see any drawbacks to expanding your search to include FSBO & Foreclosures. We have already covered the pro`s and con`s of Foreclosures. It is a Buyers Market you should look at everything in the area you want to live. I don`t see any drawbacks only the benefits of more homes to choose from.

What`s with all the questions? Are you writing a book?
0 votes Thank Flag Link Wed Sep 5, 2007
Mr.P, Other/Just Looking in Arizona
MVP'08
Foreclosures may have hidden problems. Seller are not required to provide a sellers disclosure. On the bright side you may gain positive equity with the purchase of a foreclosure. Seek the advice of a Realtor
0 votes Thank Flag Link Tue Sep 4, 2007
Typically, foreclosures are being sold 'as is'. The buyer has the opportunity for inspections for their info only. In a normal resale situation, the buyer has inspections and then repairs are negotiated. With a FSBO, the seller does not have representation by a licensed Realtor and is selling the property themselves.
0 votes Thank Flag Link Mon Apr 23, 2007
We feel if a home is a foreclosure in an area that has increased prices of the previous year...it is far more likely to have a problem that was not financialy motivated. (even if you have financial problems...if you have equity you can make money so why forclose?) FSBO's can be a good deal...but let the buyer beware!
0 votes Thank Flag Link Mon Apr 23, 2007
If you are interested in the purchasing a foreclosure or short sale property you would be wise to work with an agent who has had specific experience in these types of sales. You can still get a great deal on many of these properties, however, negotiations can take weeks and often closings are extended well past the original close date. Patience and persistence are a must.
0 votes Thank Flag Link Mon Apr 23, 2007
The recent subprime lending issues have certainly lead to an increase in foreclosures in what is known as the north Katy market - north of Interstate 10. While there are abundant opportunities, it would be wise to have an expert in the area advise as to any adverse conditions that might affect your ability to either lease the property or to 'flip' and put it on the market to sell. Supply and demand will have a large affect on the appreciation of these properties. Also, the days of really picking up a bargain on foreclosures are just about gone. Be sure you have done your homework on comparables in the area, how many foreclosures you will be competing against in the future on the flip or leasing market and how much this property is truly worth. Regarding For Sale By Owner or FSBO, where a seller may choose to represent themselves, buyers might wish to consider having an experienced real estate professional, preferably a Realtor, who can help them through the mind field of inspection, survey, title and appraisal issues. Many transactions fail to close simply because neither party truly understood the challenges involved in one of the most complicated processes that we, as consumers, will go through in our lifetime. As a Realtor, it is my job to anticipate and work through these issues on behalf of my clients.
0 votes Thank Flag Link Mon Apr 23, 2007
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