Are more foreclosures coming? Will the Cape Coral housing market crash? Do I sell my house now? Do I buy a house now? Will the 2008 collapse happen all over again? These are all very good questions, and the honest answer is…….no one knows for sure but lets talk about what we do know, things to watch for in the coming future what you should know when buying a foreclosure or auction property.
Our real estate firm, TM Listings LLC, is an expert in foreclosures, we’ve sold thousands for banks, and the government (FHA). Not all foreclosure buying processes are the same, in fact they can be vastly different. When looking to buy a foreclosure its important to understand they are sold as-is, meaning the bank doesn’t know much about it the property, they took it back by means of foreclosure and have never lived there. Do as much investigating as you can before writing an offer. Call the county and city and check if there are any:
Assessments or future assessments;
Check with the city permitting department and see if there’s open permits.
If you find assessments or open permits, sometimes the bank will work with you but not always, its better to know before you buy than find out after. Look at the home closely, do you see any property repair issues, the bank will likely not fix anything or give compensation. You want to make your offer on the property As-Is, so look at the home under a microscope, bring a contractor if needed. If you discover material defects, talk to your lender and make sure the lender can still do the loan with the material defects WITHOUT making repairs before closing, remember the bank probably wont make any repairs. Make your offer contingent upon a property inspection. If there’s a Homeowner Association, make sure its contingent upon reviewing all of their docs.
So you’ve done all your research and your ready to make your offer. Have your agent reach out to the listing agent and find out what’s needed to submit an offer. Some banks use online portals, some want a written offer, find out what’s needed and follow it 100%. Don’t try to change the banks process to your process then complain they are difficult to work with, this wont be a winning strategy, I’ve seen way to many agents try this only to lose the home to another buyer.
Once your offer is submitted you need to have patience. Sometimes asset managers will have hundreds of files and get thousands of emails, it can take a little time to get to your offer. Trying to rush an asset manager, in my experience, doesn’t work.
Once your offer is accepted, find out how to dewinterize the home for an inspection and appraisal. After you get through the property inspection you should feel good about the purchase. You’ve done your homework and got a good value.
Some buyers avoid foreclosures because they are nervous, they will buy a bad house, however if you do your homework, follow the above recommendations, you will build confidence going through the process. If something bad comes up through the process you cancel…you’ll have some time and a little money into inspection but protect yourself, not a big deal.
Why do people buy foreclosures?
You can you get a good deal buying a foreclosure, sometimes a REALLY good deal.
What’s a good price to offer on a foreclosure?
It’s important to understand how a bank arrives at list price. When banks list a foreclosure home they typically have the realtor do a BPO (Broker Price Opinion) and have an appraisal, that’s 2 different entities evaluating the price in the as-is condition. The list price is based on market data. The bank will then list the home based on the recommendations from the Realtor and Appraiser. For example, if the market data shows a home is worth 300k that doesn’t mean they bank will take a 180k offer, that’s a total waste of your time, not a winning strategy. No one at the bank is sitting around freaking out about 1 single home, hoping someone low balls them and they can get it off their books….no banks operate this way. It doesn’t work that way. Sometimes Appraisers undervalue a home and you can buy it, negotiating off list price doesn’t matter, it only matters what the value of the home is and how good of a deal relative to market value you get. For example, a home is worth 300k and the bank list it for 225k and you pay 230k who cares if you over paid 5k you got 70k below market value. Patience is key in buying foreclosures and timing your offer. If a home is listed and it doesn’t sell banks typically will reduce price between 30-60 days. You have to be patient and wait until the price is right for you, sometimes waiting for multiple price reductions. Then submitting an offer right before a price reduction at a price you and your realtor think the bank will reduce, sometimes banks will accept the offer instead of reducing price. This is a good strategy.
Key data points to watch:
Inventory rising. Inventory is rising fast but we are still in a low inventory. It is changing, we have to continue to watch close, there is a threshold when there are more listings then buyers and sellers have to drop price to compete for buyers. This will trend a market down. We started on this trend a couple months ago, still too early to know where its going.
Price reductions. Are price reductions growing? We are seeing a lot of price reductions, will they continue? Its still to soon to know. We need to keep out eye on this data point and see if the trend continues.
Rising interest rates. Rates are rising, if they continue it will push demand down and less buyers will be able to afford a home. Less buyers = less demand, usually results in price decreases. Fed will continue to meet and we will continue to watch the rates.
If the above 3 things continue to trend in the direction they’re going now, we will eventually see more foreclosures. They take a long time to get through the system. It’s possible the government will require a different form of liquidation, we don’t know how this will unfold, its way to early to tell.
Real Estate trends, it could trend down for years, trend down for a few months, go flat, then trend up. We will continue to watch and react to the data.
Our firm represents banks and also sells FHA foreclosure homes. We are foreclosure liquidators. If you want to buy a foreclosure reach out to us and get on an MLS watch or our foreclosure list so we can email you as we get foreclosures. We are starting to see them trickle through.
You can find HUD homes here
Thanks for reading.