I Want to Buy a DEAL A common conversation that we have with buyers is about “deals”. Many buyers, whether investors or home buyers, want a “deal” on the home they will purchase. Buyers will tell us that “I want to purchase a foreclosure, because that’s where the deals are”. Our response is always along the lines of “Not so much” and then we explain.
Back in 1992, we bought a foreclosure home. Bob gave his social security # right to the bank and they approved the mortgage within a few days. We got a “deal” on the home and were thrilled. Banks back then priced homes based on the balance of the mortgage of the foreclosed owner so that they could recoup their loss. That’s not how it works today.
Today, banks want fair market value for the foreclosure homes. What this means, is that banks are no longer interested in recouping their losses; they want to make money on foreclosure properties. Banks go through an elaborate process of valuing homes and generally have multiple Realtors provide them with valuations on the property. If the variance between the two valuations is greater than some percentage, the bank will call in more Realtors or even pay to have a formal appraisal done. At the end of this process, the property can end up being priced too high as inevitably someone will give the bank a high valuation. This skews the information and the property gets listed too high.
Based on the bank’s valuation process, banks determine their bottom line number. If a property is overpriced and you offer a fair amount to purchase it, the bank will most likely counteroffer so that they are in compliance with their guidelines. So, your fair offer most likely will not be accepted as the bank’s expectations are unrealistic. Once the price is reduced to a range that is acceptable to buyers, it will most likely go into multiple offers and the likelihood of winning that property will decrease with the number of offers that come in.
So, where are the “deals”? Short sales. Buying a short sale can be a minefield. Many are fraught with issues that run the gamut of both the imaginable and unimaginable. Those issues can affect just about any part or every aspect of the short sale. A short sale buyer needs to have no hard and fast closing date - they need to be able to wait for the bank to go through their approval process. This process can take a few weeks or many months to happen. A short sale buyer needs to work with an experienced short sale Realtor.
Short sales don’t discriminate. Short sales are in every town. Short sales are in every price range. Short sales can be relatively easy to complete or they can be nearly impossible to get done. Short sales are a mixed bag. Looking for a “deal”? Check out short sales.
Bob & Richelle Ward, Realtors, ABR
Prudential Connecticut Realty
Cell - (203) 470-9818