Not a week goes by that I do not talk to some buyer prospect who states their interest in buying a distressed property. Word on the street is that these foreclosures, short sales, estate sales, HUD and Fannie Mae homes and the like represent the best deals the market has to offer. But is this true? Here are some quick hit random thoughts that I usually end up discussing (in no particular order):
- How Low Can I Go? Most of these properties are currently offered at the best price the seller and / or the bank is currently willing to take. So, do not expect to be able to come in and offer 30-50% less than the list price. A 30% discount would be on the extreme high end and very unlikely, whereas a 5-10% discount is much more reasonable and likely. If you need the price to be a lot lower than that then you either need to keep looking or else be willing to wait many months (and gamble) to see if the seller and / or bank will end up dropping the price.
- HUD homes seem to represent some of the most discounted homes at this time (in general).
- Short sales will take at least 3-5 months, will be frustrating and in the end may not work. Foreclosures are usually a good bit faster. (FYI, if you are a seller reading this and are considering a short sale, you should definitely consider our short sale services: shortsale.group15realestate.com)
- The Money Pit? Go watch this Tom Hanks classic before you buy a fixer-upper. Appropriately factor a house that is in need of a lot of repairs and obviously has had significant deferred maintenance. As much as you can see that is wrong with the house there is a ton that you cannot see. Realize that the person that owned that home did NOTHING to maintain it... ever. Value your time and headache and realize it will always cost more and take longer to fix than you think. With that in mind, also look at some houses of similar size and location that are already in immaculate condition and being sold by a very responsible homeowner. Perhaps this home is actually a much better value!
- Good deal? Just because it is a distressed sale does not automatically make it a good deal and just because it is not a distressed sale does not automatically make it not a good deal. Allow your real estate agent to give you good guidance on what is and is not a good deal completely aside from whether or not it is a distressed sale.