FOR ALL OTHERS: The only "sellers market" in america is the foreclosure market. Don't expect any deals from a foreclosure as the bidding process brings 20-30 people to bid on almost every deal. A deal that was already priced at market. For government foreclosed homes, by law, they have to be priced "at market".
The REO manager has a short list of "cash/close in 2 day buyers", they always get the first right to bid. Then they have to wait for the "public auction" Which drives up those prices. After a 30-60 day period. Then the REO picks the best bid. Sometimes, only sometimes does a REO manager take a property directly to a buyer he knows peronsally. Why should he, he has a bunch of people bidding and driving up the prices.
My REO manager friend likes to joke about all the "first timers" who continue to drive up the bid when they don't hear anything from the bank. Every time I see the "how come I haven't heard from the bank about accepting my foreclosure bid after 30+ days" on trulia, I have to let out a chuckle because he's so right. For those newbies, this is real. They know that when you don't hear from them that a large percentage of people drop a second or third offer higher than the previous one. **WARNING, YOU ARE BEING TAKEN ADVANTAGE OF HERE**
You want a deal on a property right, everyone wants that.... So the moral of this story is:
1. the 60 days you have to wait to hear from a REO, you could have made 2 or 3 better deals with a property that has been on the market for a long period of time. Any realtor can help you drop a crazy offer.
2. You are attempting to make a deal in a house covered in a cloud of bad energy, don't be surprised when it rubs off. Personally I stay away from these for this reason entirely.
3. One way to get a deal is dropping a hand written note on ANY house in a neighborhood you want to buy that says "my girlfriend and I want to buy a house in this neighborhood and yours looks cute from the outside. Do you know anyone that is looking to sell?" I always get responses, better prices and positive energy into the home.
First there is a difference between foreclosing & foreclosures. Foreclosing usually refers to "short sales". There are not a lot of pluses to this situation since the bank can take months to respond to an offer. Foreclosed, or real estate owned properties sometimes sell for less than traditionally sold properties. Sometimes they sell for more money. The downside, as earlier mentioned, is the lack of disclosures. If you do buy a foreclosed property, be sure to have a fantastic inspector - one who's recommended by someone you trust.
Jeff, now is a fabulous time to buy. Rates are great. The sheer number of foreclosures have driven down prices of all homes. If I were you, I would find a good local realtor who can show you many properties, both foreclosures & traditional sales. If you limit yourself to foreclosures only, you will be making the same mistake I see many people making, and miss out on many of the great deals out there.
As stated by Brian the potential price paid for the home would be a definate pro. One of the major cons is the lack of the rules of disclosure applying to the purchase of the home. In a sale where the home is still privately owned (meaning owner occupied not bank owned) the owner is required by law to provide disclosure about any issues that may affect the home from possible lead paint usage to any mold that they know about. When the bank or an investor owns a property and it is therefore not owner occupied those rules don't apply.
Also, some folks can be poo-poo heads when they realize that they are losing their home so they sometimes do serious but not readily visible damage to the home as a parting shot. I have heard of concrete poured down plumbing and seen all the fixtures including sinks and door knobs getting taken or destroyed.
So, if you are considering purchasing a bank owned or REO (which stands for Real Estate Owned and is a fancier way of saying bank owned) property make sure that you A) have a good Realtor that you trust working for you and B) that you get a property inspection to find out exactly what you are buying.
As for the pricing you are seeing here and elsewhere. You are wise to realize that the amounts you are seeing are not what the properties will ultimately sell for. Some agents are of the opinion that listing a property for an unrealisticly low price is a great way to drum up interest. And the truth is that it will indeed peak interest, but what it really does, in my opinion, is cause a whole bunch of paper to fly back and forth without accomplishing the desired goal - the sale/purchase of the home.
If you are truly interested in looking into purchasing your first home I would be most happy to sit down with you to share what I know about the process and to discuss helping you embark on that journey. As a buyer's agent (which is what I would like to be for you) you would not be agreeing to pay me anything and in fact, you would not be paying for my services at all as they are paid for by the seller.
I have successfully handled the sale and purchase of properties that are in distress for my client's. Feel free to give me a call at your earliest convenience so that we can set up a time to meet.
Tisza Major-Posner, Realtor, Keller Williams (909) 837-8922 or (213) 392-4084
We have many clients that have made good $$$$ buying the foreclosures.