Foreclosed Homes Not the Steal You May Expect
By Cheryl Reid-Simons
Many homebuyers dream of picking up a foreclosed property for a fraction of its value. They envision themselves taking advantage of a bank desperate to unload its inventory and all but giving away perfectly good houses. But according to an analysis by Zillow, the true average discount on a foreclosed home in the Tampa area is just 9 percent.
That’s close to the average discount nationally – 7 percent – but far below homes for sale in Cleveland that have a 25.8 percent discount. Foreclosures are not the steal that a lot of home buyers think they can find.
Real estate broker Anne Rubin with Century 21 Advantage Gold said banks are getting better at managing their foreclosed property portfolios and aren’t selling for outrageous discounts.
“Banks have really gotten good at doing their due diligence,” Rubin said.
Buyers often have an unrealistic expectation of how much they can save.
“They expect when it’s a foreclosure they’re going to buy these homes at great discounts,” Rubin said. “But the properties are actually selling for pretty close to value, based on their condition. Buyers are getting a discount, but not that dramatic.”
There are other surprises when buying a foreclosure.
“The kind of buyer that wants a foreclosed property and the kind of buyer a bank wants aren’t always the same,” she said. “The bank wants a cash buyer who can close in 30 days with no inspection.”
According to a study by RealtyTrac, in 2013 foreclosure activity fell to its lowest level in six years, but increased in some states where foreclosures tend to take longer.
Florida was among the cities where foreclosures took the longest – 944 days. Nationwide, the average time to complete a foreclosure was 564 days.
Most buyers are starting to understand that a property may be deal, but one that won’t be a quick steal.
Still, Rubin said she gets calls regularly from people asking her to find them a good deal on a foreclosure. She suggests they look for a good deal and not focus on foreclosures.
But a foreclosure can be right for some buyers, Rubin said. If you’ve got the right kind of financing, flexibility about your move-in date and money left after the sale to do any needed renovations, a foreclosure can work out.
The key, Rubin said, if finding an agent who can walk you through a foreclosed property to determine if it is those types of properties are right for you – before you get your heart set on one in particular.
“There is a lot more involved in a foreclosure than people realize,” she said.