Why Are Foreclosures So Sexy?

If I added the word free to the title of this article it would probably be the most effective real estate Ad ever written! Foreclosure is a powerful buzz-word. It seems like everyone wants one. But the truth about them is foreclosure properties aren't all they are cracked up to be. In other words, not always a great deal. (Where ARE the deals, you ask? The answer is coming) Don't get me wrong, some people have gotten awesome deals.
But in my experience, and I've got a lot of experience working with buyers and foreclosures, most of the people who got the great deals had four things in common:
  • Hands-on construction experience
  • Patience
  • Vision
  • CASH
So, what does make foreclosure homes so appealing? Perception of value. Here is the idea people have. A home is being offered for sale for less than the current owner paid for it-therefore it MUST be a good deal. That's a false assumption based mortgage numbers. Mortgage numbers have little to do with market value. (What the home is worth to a buyer)
Lots of homes are in, or going into foreclosure after being occupied for only two or three years. And in that time frame lots of buyers were getting 100% financing. There is more than likely a NEGATIVE equity situation in that home!
Also, think about this a second. What are the chances a home is being maintained properly if the owner isn't making the note payments? Zip, zilch, nada. One consistent trait that foreclosures share is they are generally beat up. Another telling trait they share is--- THEY AREN'T SELLING! Let me repeat that-no-one wants them.
The bottom line really is the bottom line here. Repair costs for updating, needed repairs and/or house abuse pushes the price right back up. Lots of time, effort, cash and risk is expended to end up with a home right in the middle of a CMA anyway. Do-it-yourself TV shows have brought people out of the woodwork-literally and figuratively!