“I Want to Buy a Foreclosure”
If I had a nickel for every time someone said that to me, I could retire. Many home buyers today want a deal! The news media is full of stories about foreclosures and many home buyers think they would like to buy one, too!
They come with stories of friends and family members who were able to purchase homes this way. They are convinced that, if it is a foreclosure, they can purchase it for pennies on the dollar and get a great deal. “Right?! All the media says we can!” A word of caution: don’t believe everything the media tells you.
Foreclosure is a process not a status of a home. As an experienced real estate agent in Central Oregon, I don’t correct my buyers when they say they want to see foreclosures, I show them Bank Owned Homes or homes that are also known as REOs (Real Estate Owned). A foreclosure is the process that a bank, homeowner, and property go through when the homeowner is behind on the payments.
Since she wrote this post, we have had dozens of conversations about the topic, and we figured out why Foreclosure became the buzzword. Foreclosure has become the media’s sexy word. Bank Owned, Government Owned, Short Sale or Distressed Sale — well, those two-word phrases aren’t as sexy as the single word “Foreclosure.” The media needs a sexy word to sell headlines.
Then you have consumer websites that have followed the media; instead of creating separate categories for these types of sales, they have grouped them under the umbrella term Foreclosure. These listings are really somewhere in the foreclosure process, as Thesa explains in her article:
At some point during this process, your lender will turn the information about the default out to the public. That is where websites like RealtyTrac, Zillow and Trulia (Zillow and Trulia appear to actually get this information through RealtyTrac) pick up homes that are listed as FORECLOSURES. These homes are often listed on these sites with a price of half what other homes are selling for or obviously great deals.
Types of Distressed Sales
In order to reach consumers, I have even had to use the Foreclosure word when talking about distressed real estate sales. I, too, lump them together with Short Sales and even auctions. It is what the consumer has become comfortable with, and I have adapted much like Thesa has in Oregon. Each time, though, I have to explain to home buyers and investors that what they really want is a distressed sale.
The owners have lost the house, and the bank now owns the house. Bank-Owned homes are usually listed with Real Estate Professionals. These listings are often referred to REO (Real Estate Owned). The reality of these homes is that they have been vacant for a long time (often years). Before they were vacant, the home owners were in distress, so they may have not maintained the home prior to being foreclosed upon. These homes are targets for thieves and often stripped of valuable components. Or worse, squatters move in and destroy the home in the process.
HUD or Government Owned
These homes have been reclaimed by government entities and are being sold via Real Estate Professionals, you can also view these homes on HUD.Gov website. The minute they are no longer available, they are removed from this website. Sometimes Realtors do not remove as quickly on the MLS, so the HUD site is the most accurate place to find out the status of a listing. Some of the problems listed in the Bank-Owned homes apply to these homes as well.
The owners are either under water or behind in their payments. They are trying to sell the home before it goes into Foreclosure. They are working with the bank to negotiate a short sale, where the home will sell for less than what they owe the bank. These sales can take a very long time to pull together, and it is not uncommon to hear of listings taking longer than a year to close. If you want to be moving into a home sooner than later, these homes are not so appealing.
These are the most common terms you see when discussing a home that is a distressed sale. They sound too good to be true, and you know that amazing deals are few and far between. Instead of looking for Foreclosures in WNY, look at the following when considering your next home:
- Homes that may be above your price point in a community that is selling in your price point
- Homes that have been on the market greater than 90 days
- Homes that are what we call “tired” — or homes that need a new kitchen, flooring, and fresh paint.
With the above criteria, you may be able to find a diamond in the rough; you may find a home with an owner who is beginning to realize that the price is unrealistic. Call us today and we can find you the right home at the right price for you!
All statistics are gathered from the Buffalo Niagara Association of REALTORS®.