Although distressed sales (REO’s, Bank Owned, Foreclosures and Short Sales) can be sexy buys, many people still have a negative perception of them. It’s important to understand that not ALL distressed sales fall into the same category as the stereotypical distressed sale. There are some truly great homes that happen to be distressed. Here are some myths we’d like to bust.
Myth: All distressed sales are in terrible condition.
Busted: Some distressed sales are turnkey, move-in-ready. Sometimes the previous owner kept the home well maintained, or perhaps the new owner (a bank or investor of some kind) made all the repairs for you.
Myth: If you buy a distressed sale, you always have to pay back taxes and unpaid HOA fees.
Busted: After a property goes through the foreclosure process and the bank takes possession, these become charges for the bank to pay when they sell it. Beware, if you buy a short sale, you may have to pay for these items. Make sure to research title to find out about these charges.
Myth: Distressed sales will always sell for a discount.
Busted: The price of a distressed sale depends on the same factors as a traditional sale. Some distressed sales can actually sell at market value or even more. A distressed sale that’s move-in-ready, in a great location, when there are multiple interested buyers will likely not sell for below market. Many buyers make the mistake of putting in low ball offers just because a home is distressed; this can offend the bank and/or asset manager in charge of the home. Get with a real estate broker to determine the fair value of the home and make an offer there. If the home needs repairs, factor that into your price in the way of a credit at close. Don’t lose out on a good home by low balling your offer.
Buying a distressed sale can be a smart decision, but it comes with its own set of challenges and learning curve. With Distressed Sales, Foreclosures, Short Sales and REO’s/Bank Owned properties don’t let the “status” affect your offer price.