It amazes me when I hear about people who have paid a subscription fee to get foreclosure listings. I don't know about other parts of the country, but here in the Minneapolis-St. Paul area you can search for foreclosure listings yourself online (I'll show you how in #1 below). It made me think about other common misconceptions and I came up with this list...
1. You have to go to a 'foreclosure' agent or 'foreclosure' website and pay a fee to get foreclosure listings.
Banks are not in the business of owning or selling homes, so most foreclosure properties are listed in the MLS and sold by Realtors just like any other property. In fact, in the Minneapolis-St. Paul areaabout 60% of MLS sales in January and February were foreclosures.
If you are looking for foreclosures in the Twin Cities area you can do your own online searching...just select 'foreclosure', usually under additional or advanced search criteria. Click here for an example of a search for foreclosure properties for sale in parts of Plymouth and New Hope (be patient as it searches for the most current listings). You can edit the search criteria on the left of the page to suit your needs...or simply ask your Realtor (or me, if you don't have your own Realtor) to set up an automated search for you and get new foreclosure listings and price reductions emailed to you as they hit the market (click here for a sample).
2. To assure getting a good deal you should only look at foreclosure listings.
While there are some good deals to be had on foreclosure properties, sometimes there are just as good or even better deals to be had on non-foreclosure properties...examine all your options. If the property is in disrepair, be sure to factor in repair costs.
3. The way to get the best deal on a foreclosure is to buy it at the 'Sheriff's Sale' .
That may be a good idea in some states, but in Minnesota 99.9% of properties sold at Sheriff sales midway through the foreclosure process are sold to the lender. Why? Because in Minnesota if you get the winning bid you pay the entire amount in cash at the sale but you don't own it yet...the owner then has a redemption period of usually 6 months to continue living in the property and bring the loan current to 'redeem' the property. Click here for more info.
4. The price you pay for a foreclosure is the balance due on the mortgage.
The price for a foreclosure property is determined the same way as for any other property...by looking at comparable listings...in this case, comparable foreclosure listings. Banks base the price on 'BPOs' (Broker Price Opinions), not on the balance of the mortgage.
5. Banks accept lowball offers, they just want to get rid of the properties.
Banks often negotiate less than traditional homeowners, they consider the list price is already low...and price must be substantiated by a BPO. They may simply reject a lowball offer rather than bothering to counter the offer.
6. Foreclosure listings are always in poor condition.
While many foreclosure properties are in need of considerable work, that isn't always the case...some are in excellent condition. Whatever the condition, however, when you purchase a foreclosure you are purchasing it in 'AS IS' condition...which makes an inspection even more important.
7. Foreclosure listings are always low priced homes in 'poor' neighborhoods.
Foreclosures happen in all price ranges and in all locations. In this link to foreclosure listings which includes parts of Golden Valley, there is a foreclosure listing priced at $1,750,000. Click here to see what percentage of 2008 sales were foreclosure properties by Twin Cities MLS area...it can help identify good places to search if you are specifically looking for foreclosure properties.
8. Multiple offers are rare in foreclosure properties.
Because prices are often already low on foreclosure listings, multiple offers are more common than on traditional properties in this market. A recent offer I wrote on a foreclosure listing had 7 competing offers.
9. Expect to close and get possession on the closing date in your Purchase Agreement.
While that sometimes does happen, it isn't uncommon that it doesn't close when scheduled. Plan to close on time, but don't expect it...you may be disappointed. Timeliness is often worse with Freddie Mac than Fannie Mae foreclosure properties.
10. A short sale is basically the same as a foreclosure.
While banks are involved in both short sales and foreclosures, they are different. In a foreclosure, the homeowner is gone and the bank owns the property. In a short sale, the homeowner still owns the property and may still be living there. You negotiate with the homeowner just as in a traditional sale, but it is subject to the bank agreeing to accept less than the total amount due on the mortgage as full payment...hence a 'short' sale. Click here for more information.
Sharlene Hensrud, RE/MAX Results - Email - HomesMSP.com
RELATED POSTS
- 10 Common Misconceptions about Buying Short Sales
- Average 2006-2008 Minneapolis-St. Paul Sale Price and Percent Foreclosures by MLS Area
- Buying a Winterized Property
- Warning: you assume some risks when purchasing foreclosure property
- What's the difference between a foreclosure and a short sale?
- Closing & the Water Bill
What great timing for this post - I just read another blog posted yesterday talking about Countrywide using Zillow to get their BPO.
http://activerain.com/blogsview/986863/Please-Flag-this-under-Hilarity-Countrywide-Loss-Mit-uses-ZILLOW
Posted by: Reuben Saltzman | March 17, 2009 at 06:37 AM
I just came across with related blog topic talking about misconceptions of today's home buyer, foreclosure listing is useful before buying thanks for sharing that information.
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