In this market that is flooded with both foreclosures and short sales, how do you know what is the best deal?
Both of these types of bargain real estate have their pluses and minuses when you compare them to each other. They are both fantastic ways of getting low prices, sometimes 20-40 or even 50% of market value so which one should you be looking at?
Foreclosures can be a pain in the butt to buy because in most cases, the property is in disrepair because:
A. The property has been empty for several months
B. The prior owner was not able to or decided not to do regular maintenance or repairs since he was about to be pushed out of his home for non payment of the mortgage. Be prepared to do maintenance or repairs to items such as appliances, ac, carpet, windows, screens, landscaping etc.
C. They usually are in rougher neighborhoods that are usually older and in lower income neighborhoods.
This used to be more the case than now because so many more people are in foreclosure due to a lot of reasons other than not being abe to meet there mortgage obligations.
I have seen several foreclosures in multi million dollar neighborhoods but usually these are not the price range for most investors. If looking for a home to live in these level of homes can be the way to go.
D. Some foreclosed owners decide to take out their anger over losing their home on the property by punching holes in the walls and doors, destroying appliances, breaking windows and even pouring concrete mix into the toilets etc.
Short sales on the other hand seem to be just as well priced as foreclosures but:
1. 60% of the time the owner is still living in the property until sold therefore takes better care of the property
2. Even though they are losing the property they have more time to get it back up umtil an offer is accepted in case their financial situation changes.
3. these properties are usually listed 20-30% below the last comparable sale in the neighborhood, regardless of whether it was also a short sale or foreclosure.
Now don’t get me wrong because not all short sales are in great condition but the majority are better maintained than foreclosures.
Foreclosures are great IF you don’t mind a property that will most likely need some work as this can be worthwhile because the price will reflect that since a property in worse conditions takes longer to sell.
The banks are aware of this so the bank may be more willing to discount it even more than a short sale property
I just had a client that wanted to buy a foreclosure so we looked at dozens until she realized that she was not going to get a bargain basement price on a perfect house that did not need work.
The bottom line is that as long as your expectations are realistic one or both of these types of discounted properties could be for you depending on what is of most importance to you, price or condition.
DOn’t let greed overtake you and get in over your head. Know your limits.