According to a recent article in RIS Media, the Treasury Department predicts we’re in for another wave of foreclosures next year. Some parts of the country are already seeing “distressed” sales (foreclosures, short sales, etc.) account for 65% of real estate transactions. The author of the article described some agents who “sniff imperiously and decline to partake in such unpleasant things as foreclosures” and noted that others are “laughing all the way to the bank.”
Anyone who has read this blog or my newsletters knows I’m not a big fan of foreclosures. I’m not sure, however, that I “sniff imperiously” at them. I rather think I choose to keep them in perspective and encourage buyers to do likewise.
In simplest form, I’ve chosen not to change the fundamentals of my practice. I’m in the real estate business; not the foreclosure business.
For most buyers, looking at real estate makes sense. Given the current state of affairs looking at real estate may well include looking at foreclosures–they are a significant part of our market. But buyers should focus on finding the right property. It doesn’t make sense to discriminate at the start.
Historically buyers have been encouraged to buy as much house as they can reasonably afford. That’s still sound advice, but the “reasonably afford” aspect is critical in this economy. Many smart buyers are buying less than they qualify for because of job insecurity and other economic uncertainties. As a result “price” has become a very important aspect of finding the right property. “The bank says I can afford… but I really don’t want to spend more than…”
And that’s when foreclosed properties become attractive because foreclosures are always about price. People love a bargain and there’s nothing wrong with that. But it’s important to understand that foreclosures may be anything but a bargain. There can be a certain amount of “you can pay me now or you can pay me later” theory at work here.
The sale price is not (and never was) the only cost of homeownership. One of the values of a professional home inspection prior to purchase is that it provides at least a sense of what costs the buyer may face over time. This can be important for any home, but becomes critical when considering a foreclosed property where, typically, maintenance has been nonexistent and in many cases the home has been “stripped” of basic systems.
In today’s market, there are many “bargains” to be found that are not foreclosures. So I’m still encouraging buyers to look at what’s available and find the right house at the right price. That’s one bit of advice that still makes sense.