A Buyer contacted me regarding a condominium unit listed on Hubzu. com. The website promotes online Real Estate auctions and Realtors can place bids, on foreclosures and short sales, for their Buyers. Many Buyers are under the impression that the only way to get a good deal is by purchasing a distressed property.
Many years ago, the market was saturated with foreclosures and short sales. Investors were placing lowball offers and scooping up properties to flip or hold as rentals. At that time, many were getting great deals as the market had crashed and prices were getting close to rock bottom.
The times have changed and those days are over. The percentage of foreclosed properties that are on the market has decreased, inventory levels are at a low, and Sellers are now longer willing to negotiate as much.
Buyers should be aware that these auction websites are charging technology and Buyer premium fees that can add up to thousands of dollars extra. Many times the Seller will not allow for the utilities to be turned on for an inspection. If a Buyer cannot close, they may lose their earnest money deposit and if they extend the closing date, they may be required to pay a daily (per diem) fee. For a foreclosed property, the Seller does not provide a Property Disclosure and typically will not acknowledge much if anything about the property. For condominium units, they typically do not provide the condominium documents and leave it up to the Realtor and Buyer to try to obtain those important documents.
Distressed properties may need TLC, repairs, and renovations and may have been sitting vacant for quite some time. When a property sits vacant, they can fall into disrepair, can deteriorate, or be vandalized. There may be issues that are not noticeable to a Buyer or inspector. In Florida, the humidity is high and when a property is vacant typically the air conditioning has been turned off. Moisture and humidity can lead to mold or mildew problems which can be a health problem. A Buyer would need to budget accordingly for repairs and upgrades.
Since many of the foreclosed properties are in need of repairs, a Buyer may not be able to obtain certain types of financing or a property may be listed as ‘Cash only’.
The contracts for foreclosures are written to favor the Seller (the Bank). The Buyer should be cautious and read the contract in its entirety. Most times, the contract will strictly hold the Buyer to the agreed upon closing date. If a Buyer fails to meet that date they can potentially lose their deposit or incur additional fees to extend the date. Also some banks fail to close on time. If you have to vacate an apartment or living situation on a certain date, this could cause a big inconvenience.
Although many Buyers have and still do get good deals on foreclosures and short sales, this may not be the best deal for you. Buyers should be aware of the risks and monetary stipulations. I have helped many Buyers find great deals and I can help you too! Give me a call to get started.