Let’s be honest. Everyone would love to find a sweet deal on a foreclosed home. Most people, buyers and investors, are under the impression that it’s fairly easy to do so. They often want a top dollar home for very little foreclosure money. Unfortunately, that’s not how foreclosures work in real life.
People think this is an everyday occurrence due to popular ads that they see everyday. It’s advertised all over television and the newspaper. They pop up every time you log onto the internet.
“Foreclosed homes take over the housing market!”
“Banks bombarded with thousands of foreclosures!”
“There’s never been a better time to buy! Own your new foreclosure for as little as $500.00!”
Obviously, these statements are very false. The main stream media ads will leave you to believe that you can just about name your own price on these foreclosures. All while, the bank president is feeding you grapes and begging you to take these properties off of their hands. Um, that’s not actual or factual, my friend.
Things aren’t always the way they appear to be
Foreclosures are, of course, going to be less expensive than when they first sold, but the banks are NOT selling them for less than retail value. It may seem like you’re going to score a foreclosed home for 50% below what it’s worth, but the market is what sets the pricing. Therefore, ALL the homes in that same neighborhood are now valued at similar prices, not just the foreclosures.
Finding reasonably cheap foreclosures
When you’re searching in MLS for foreclosed homes, keep in mind that these prices represent the current market value for that area. The homes have been appraised by professional real estate agents whom the bank brings in to tell them a realistic asking price. Once the home is listed, other agents become interested for their own clients. An all out bidding war can begin. This usually leads to multiple offers on that one foreclosure, and that leads to rising sale prices. It can actually boost a foreclosed home sale price over current market value.
Don’t despair. There are a few places that may help you meet your desire for a cheap foreclosure.
- 1. At a public auction.
There are always listings for public auctions in newspapers and online. There are even websites dedicated solely to them (although you may be charged a fee for using those). You can even call your local sheriff’s office to see if they have any information on upcoming auctions in your area. If you decide to go with a public auction, be sure to hire a title company before you make a bid. They will make sure that the title is clean, with no liens, back taxes, or defaulted dues. Should there be any of those issues and you purchase the home, those debts then become your responsibility to pay for.
- 2. At a private auction.
Private auction houses will typically allow financing on cheaper foreclosures (versus the usual cash policy of public auctions). You can find these listings through the web or in your local paper. On a side note, it’s always a good idea to take a buyer’s agent or legal representation with you when you go to place a bid.
- 3. Straight from the bank.
In certain situations, you may be able to contact a lender directly to offer a bid on an existing foreclosure. This may be an easier job for an investor than a regular buyer though. Banks tend to prefer multiple foreclosure purchases if you’re buying straight from them with no middleman. So, if you’re going to try to go this direction, you may want to have quite a few offers for quite a few homes in your pocket. This is the best way to be taken seriously by the foreclosure lender.