I get this one all the time, "I want to buy a house in foreclosure so I can get it for a steal!" Well, reality steps in and I have to explain how the process works...so...I figured I would dispel some of the myths that are out there about foreclosures and short sales...
Myth: Banks are anxious to sell their inventories, so they'll take a low ball offer.
Truth: I have to keep this in context...not all situations are the same, however, in most of the short sales and foreclosures I have encountered the banks are not overly anxious to move their property and will reject offers that do not meet their objectives (low ballers). In some cases, if a property is in foreclosure and the price is dropped $100k, we see multiple offers come in and bring the price back up closer to where the bank wants it...or to where a 'reasonable" offer would have come in at.
Myth: Banks are anxious to make a sale and will move quickly.
Truth: Really? I want to work with your bank!!! They DO want to sell the property, but they have protocol and regulations and new legislation to consider and the process can take up to six weeks just to get a yes, no or even a counter offer! In some situations, if the bank is able to prepare before an offer is presented, the process is much quicker, but the averages fall into the 2-4 week range to get a yes or no.
Myth: Foreclosures are cheap and a good deal if you can get it.
Truth: Most foreclosures and short sales come in at or just under market value. You cannot expect to get a $500k property for $100k...it just ain't gonna happen. There are some exceptions, of course, where whole neighborhoods seem to be in foreclosure (mostly in the further out suburbs) and prices drop dramatically for all sellers in that neighborhood, but most of the properties need LOTS of TLC...which can be great for investors, developers and builders...but they can be large undertakings for the average buyer.
Myth: Short sales are a pre-foreclosure step and I should wait for it to go into foreclosure to get a better deal.
Truth: Short sales are not all "pre-foreclosure" situations...some are just cases where the owners owe more than the current value (and have to also factor in the costs to sell) and need to sell the house for different reasons than avoiding foreclosure, but don't have the funds to pay the difference (either their payments are draining their monthly income, they are divorcing, they have to relocate, etc.).
Okay, that's all for now...I'm getting a sleepy from a long weekend!
Cheers - D