But I only want to buy a foreclosure...
I can't even count how many times I've heard this statement. Foreclosures can be a great deal, no argument there. I have closed numerous deals for clients on undervalued properties that were foreclosures. But not so fast...
Don't get caught up in the hype surrounding foreclosures! Some buyers get stars in their eyes when reading articles and watching documentaries about the steals to be had in regard to foreclosures. They are drawn into orbit by some magical gravitational pull... or are they just circling the drain? Peel back the foreclosure label and look at the facts. 2 factors that are very important to consider are 1.) Condition & 2.) Price per square foot.
For instance, if I find 2 very similar homes for sale in the same area and one is a foreclosure at $68 per sq. ft. and the other is owned by an idividual and offered at $61 per sq. ft., with all other factors being the same, I would lean toward the individually owned house every time. I don't care about the foreclosure label on the other one. Ultimately, ALL properties are priced by people. Sometimes they miss the mark, are fishing for a higher price, or are controlled by a bank's operating procedures and/or financial position in a property.
Here's another scenario... 2 similar homes, both priced at $70 per sq. foot. The foreclosure has been neglected and needs a lot of work. The individual's house is move-in ready and has a newly remodeled kitchen. Again, I would lean toward the individual's house. But let's dig a little deeper...
Assume the same scenario, but this time they are the same per sq. ft. AND the same overall condition. The foreclosing bank has announced it will not pay for the survey, the title policy, will not allow any seller contribution towards buyer closing costs, an it is sold as-is with no repairs after the inspection on their property. The individual on the other hand, is willing to pay for, or at the very least, negotiate on these items. The difference will easily add up to thousands of dollars. Remind me again why the foreclosure is the better deal?? Don't get me wrong here, foreclosures CAN be a great deal, but they've got to show me more than just the foreclosure label.