Folks, there are foreclosures and there are foreclosures. I often get new leads from people who "only want a foreclosure..." Why? It's always because they think they are going to steal the deal.
Now, of course, there are instances where a foreclosure can be a "pink elephant" bargain, but more often than not the prices are similar. Market value is market value. And with more and more short sales and foreclosures on the market, there is little to no distinction or separation between "regular" market value and "distressed" market value.
But still, I press on with people who do end up finding a foreclosure they simply love and must have. It is then I have to remind them about several key things to watch out for in foreclosures.
- The banks (and their support companies) have probably never stepped foot in the property, so the bank will not know any history about the property.
- Banks know cash, not homes. So expect them to deal strictly in a business-like manner to convert assets back to cash (and understand all the possibilities that go with that).
- Banks will not fix anything you find wrong with a home.
- Being vacant for a length of time, the property has not had a loving eye on it (and its maintenance). Expect issues to arise during inspections.
- If you write a purchase contract with a bank, you will likely see long delays as it winds through various departments and investors. You are also likely to see a custom contract and/or addendum which almost always favors the bank on all aspects and terms.
There is an excellent article that goes into more depth about this should you care to see it.
In contrast, I do want to call your attention to a fabulous arrangement I have with a local Miami bank. In short, I have been working with this bank for quite some time and they buck the trend when it comes to foreclosures. Here's why:
- Standard contracts! Yes, this bank does not require buyers to sign insane addenda or onerous terms. This is a hugh deal and worth noting.
- They are not a behemoth. As such, when an offer comes in, they respond in minutes...not days.
- To some degree, they know the property. At least once, a bank representative has been to the home and has seen its condition. This leads to fair pricing.
- This bank is nimble and does not hold assets long. That means someone has likely lived there recently and maintenance shouldn't be too deferred.
- While they will not fix physical issues with the property, they are careful not to put a property on the market until they are quite comfortable that they have good title and can close. This is also a major improvement from the norm.
So, if you are moving to Miami and really feel foreclosure is the right choice for you, I welcome you to speak with me about my inventory first, before you head into no-man's land...