Welcome Home: Foreclosures a great deal?
We’ve all heard stories about the deals to be had by buying a foreclosed property. In the luxury market, we’ve even heard one story of a the $6-million-dollar home that sold for $2 million in foreclosure. Some of the stories are true and some people have gotten amazing deals, but in fact, these deals are actually few and far between. Most people who managed to land a deal on a foreclosed property will be honest if they say it had more to with timing. For most buyers, and in particular, high-end buyers, the foreclosure may not be the best deal on the block.Let’s say a home was on the market for $3 million dollars. It doesn’t sell for a list of reasons and the bank forecloses. Maybe two years have passed… The bank takes possession, does their appraisal, collects broker price opinions, calculates the value decline over two years, and then sets their price to sell quickly. Let’s say the new price is now $1.7 million. $1.7 million probably represents a much fairer market value for the property; however, when “Joe Buyer” sees that the property was a foreclosure, he thinks he can negotiate the price down from 1.7 to 1 million. Probably not. Let’s be clear – banks are really healthy right now. They have lots of cash and although not good for inventory levels, banks don’t mind holding these homes. We took a look at 12 foreclosed homes that sold in the last six months for over $1 million dollars and in most cases, the banks only discounted another $75,000 to $125,000 off their original asking price to get it sold. What does this tell us? Very simply, once a bank puts a home on the market, they’re probably not going to deeply discount it to get it sold.Let’s take a look at a NON-foreclosed home. Maybe it’s a builder’s home, a builder’s home with a bank involved, or just individuals. These types of people have no bank guidelines or mandates that they must follow. They are much more flexible with their price and can make quick decisions. In many cases, they have a much greater ability to discount their property than the banks do. There are many private sellers that had their homes for sale in the $5-million-dollar range, but who would now take in the $2-million-dollar range. There are homes currently for sale, where buyers can get 30, 40, even 50 percent off the original asking price. So, why wouldn’t “Joe Buyer” be going after these individuals? It’s an easier transaction, you don’t have to take the house “as is” like every foreclosure, and you don’t have to jump through all hoops or be at the bank’s mercy. The reason why “Joe Buyer” doesn’t always target motivated private sellers is because he has been brainwashed that the best deal out there is a foreclosure.Bottom line? A motivated private seller may be a better deal than a foreclosure, and without all the hassle.Dan Polimino is a top real estate agent in Denver and provided the content for this article. Contact Dan, email@example.com, about buying or selling Denver real estate.Welcome Home is written by Butch Elich & Paula Parker. Search for them by name on Google, Twitter, or Facebook.
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