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Foreclosures are not a good buy anymore. The banks are looking for appraised value and many times the homes need a lot of repairs. Often they turn off the utilities because no one can pay the bills. Then you run into frozen pipes and faulty equipment with no way of knowing. Also, as you say, owners max out the equity so the bank has to collect full market value. No bargain there.

I agree fully!  I recently showed a foreclosure in an established subdivision.  Of all people I showed it to the original owners.  They sold it 2 years before for 295K.  The home was as you mentioned AS IS, No Warranty, No Disclosures, no heat, burst pipes, vandalized, appliances stolen etc.  The list price with a notation FIRM, and if agent is buying on their own behalf no commission would be paid.  My guestimates was the home was worth 240K.  Similar homes that were owner occupied and in great condition were priced at 315K.  The banks price on this peice of garbage?  365K

Bueno Jim!  I posted about this a week ago.  NODs/REOs consist of just a little over 1 % of our total listing inventory.  Short Sales 3.5%  They are competitively priced and you get to deal with liens and deferred maintenance.  There are PLENTY of other bargains out there to be playing with other than defective property that will eventually be overpriced when you are done satisfying liens and rehabbing.

REO properties are being priced for owner occupants not rehabbers. THe main problem is that the lenders are have so much into these properties that they have to sell high. I showed a short sale last week the home should bring 219k and the bank has loaned 320k on this home.

Short sales until now have been almost a rarity in our market.  What I've seen are way over priced considering current market sales, and loads of inventory.   Short sales may vary market to market across the country depending on available inventory, absorption rates etc.

You make a good point my friend but if a lot more foreclosures come on the market (some areas are being flooded with them) you will see banks and other instututions taking what the market will bear.  Our area is strong enough that your scenario applies.

I think timing is everything.  In some markets the inventory in foreclosures will cause some lights to come on!  When the banks realize the investors are not bellying up to the bar to purchase with no questions asked.  What many markets have been relying on are out of state investors trying to time the movement out of one softening market and into the next hot market.  Since they are from out of state, they do not ask the right questions, and in turn do not buy right, and also go into foreclosure.  Sort of like a sucker rally on Wall Street!  Their greed makes them easy marks! In my estimation that is the stage we are at in many markets.  The investors I know in the past made money on the market.

I just did a bpo and the house sold for $11,000 more then the best comps. Its a lot for a house under $100,000. Most don't have the margins my rehabbers are looking for.

Never say "Never."

Case by case, with a lot of sifting through, they can be a buy. 

But it is getting harder to find them, with all the people who are shopping them.

A foreclosure may be a good buy if it really ever had anything going for it.

I know one I am promoting hard to two different parties and I think it is a buy for a variety of specific reasons.

But it will likely sell for more than the listing price.

Thanks for your comments.  The needle in the haystack tends to surface everyso often, and so does a winnter on the weekly lottery. What  I am talking about is that most foreclosures I am seeing in my market are not a great buy.  In the 90's you did not buy a foreclosure price plus!  YOu bought for maybe 70 cents on the dollar.   I am not seeing that right now.  What is the strategy in market price plus? The best deals todays market are vacant and corporate or a relocation if you can find them.

I sold 3 last year all to owner occupants.

I think they can be a buy for this segment but they are like any other sale, you have to look at the numbers and buyers situation.

I sold a couple REOs to investors last year and they were both mistakes and haven't been resold yet.

Terry Lynch 

Thanks.. I agree.  Most of what I've seen lately are not the type of buys I saw the last time the market went soft.  I wouldn't purchase them!

Jim, 9 times out of 10 when you search a foreclosure by a REO Agent in FMLS, it is not even the cheapest comp in the neighborhood.  You are right on track with this one.

I know, and what is with this thing licensed agents purchasing for themselves do not get paid any commission in the Atlanta area?  I'd love to see if other areas in the nation are doing this!  I think it is totally rediculous to exclude commision for agents!

Thanks for sharing

The key element in a preforeclosure short sale transaction, as well as an REO proposal, is to confirm the subject's as-is, fair market value, and then challenge the lender's perception of value. 

The lender's prediction of net recovery is predicated on information provided from an origination appraisal, delinquency BPOs, and market fluctuation indicators.  The origination appraisal might have been inflated.  Many, not all, BPO providers have an inherent conflict of interest in which they are positioning themselves for future REO servicing assignments, and may, instead, provide 'rosier' market data.

A  factually well supported and compelling short sale proposal will open the door to negotiations, and should result in price reductions and substantial savings.

Not every preforeclosure, or REO is short sale indicated.

ForeclosureFocus Blog

 

Thanks for sharing your insights. That is not what we are seeing in the Atlanta area.  Thre are short sales, but that is not the majority of them.  The majority are market price plus!  They are over priced for the condition as compared to available comparable resales in 1000% better shape.

If you pay what it's worth, or more, then you're not an investor, you're an idiot. The people who do these things have just from a no money down seminar. You can't be timid, you have to make a low ball offer without worrying about hurting someone's feelings. If I can't get a 30% discount from market price (after I've done the repairs), I walk.  There's enough desperate sellers and banks out there that some will bite. Realtors will keep the cream of the crop for themselves - you have to find and make the offers yourself.

I agree with you, it is not about win win!  It is about hitting the grand slam...then it makes sense!  Great quote! "You can't be timid, you have to make a low ball offer without worrying about hurting someone's feelings."

I make a business of buying foreclosures on the Cobb County courthouse steps.  We see about 400 properties a month listed in the notices of sale.  By the time the auction takes place, the majority have dropped off, but that leaves about 150 or so that go into foreclosure.  Of that number, I would speculate that only about 15% are worthy of investment.  The rest go back to the lender and that is what you guys are seeing.  We do our homework and no doubt, there is not as much margin in the properties today as there was in the past.  Still the bargains abound if you look hard enough. 

Additionally, and as was previously mentioned in this post, the lenders will eventually be forced to cut their prices if their inventory backs up.  Thankfully, that hasn't taken place.  When it does, I expect that to be the early indicator of a declining market.  Something we have been relatively immune to so far in our area.

R,
David

BuyHawkeye

David thank you very much for your insights!

I guess it depends on what one considers a "buy".  It may not be strictly price driven, although that would certainly be a consideration.  But it could be an opportunity to buy the worst house in the best neighborhood.  It might be having the seller cover closing costs or offering other incentives to make the buyer feel like they are getting a better deal.  Also, what are the buyers plans?  Will they be there long term?  If so they will most likely enjoy the appreciation when the market cycles up...and it always does.  The problem is we all seem to be so short-sighted about the market, living in the here and now.  What about 3 years from now?  What are we doing and saying to our clients about what to expect in coming years?