This week the Sacramento Bee ran a pretty good article on buying foreclosures. It reminded me of my experience with a HUD auction during the last recession, in the early 90s.
I teamed with a fellow Realtor and friend to research and bid on a major HUD auction of repossessed properties. From experience, we knew there would be lots of bidders and lots of competition, so we decided to focus on the least desirable, most plentiful segment: Compton repos.
We spent several days researching about 50 Compton properties prior to the auction. Available comps, physical inspection of each property, etc. When we showed up, it was like a circus! Every property got bid far above similar homes that were in better condition that were available through the local M.L.S. We were far outbid every time.
At these auctions, each segment of the audience is worked by a smiling, tuxedoed Texan. At one point I commented to one of them, “These homes are going for way above market value.”
“Oh no!” he said, between prodding buyers to up their bids. “That means most of these deal will probably fall out and not close.” Even auction buyers apparently get remorse and realize they overpaid.
Our conclusion: There are buyers who are willing to pay any price for a foreclosed “bargain!”
From the Bee article, and others in local papers, I don’t think much has changed!
Now here’s a summary of what the Bee says you need to know in advance about buying bank-owned properties:
– First-time buyers will need to be pre-approved by one or more lenders.
– Don’t be surprised if the bank that owns the home requires that you finance your
purchase with them.
– Expect competition. Many buyers bid on multiple properties.
– Banks won’t accept offers that are contingent on selling your home.
– The best deals generally are those homes with the longest time on the market.
– Bank-owned homes typically sell for 10 to 20 percent less than their listing price.
– Be sure to pay for an inspection and consider the cost of repairs or damaged or
missing appliances when bidding on a foreclosure.
– The bank is likely to make a counter-offer. Be sure to consider this when submitting
your first offer.
– Some banks will not accept an offer unless it is submitted by a REALTOR®.
– Banks generally are looking to close quickly, within two weeks to 45 days.
Note added 4/9: From today’s release of SoCal stats on homes beginning the 4 – 8 month foreclosure process in March, it looks like we’ll have lots more foreclosure auctions in the months ahead. (See “So Cal Foreclosures Up Again & What It Means“)
SoCalRealEstateNews 