The media has been full of information on how to get rich buying foreclosures. Opportunities do exist for investors and agents who want to run a high-volume, low-commission business. But the homes and the opportunities are not as wonderful as the media may lead one to believe.
The process of buying a home from a bank is different than buying it from a private party. It is slower and there is more paperwork. Large asset management departments handle foreclosures. Employees are in charge of "files," and they have hundreds of them. They get sick, take vacations and don't answer the phone. These employees play the role of the seller, but there is no real incentive for them to efficiently close the transaction.
Getting these homes inspected is a challenge because often the water has been turned off by the city. The bank has a process and policies, which means it takes longer to get the simple things done that most of us handle on the spot with a phone call.
Often no effort is made to clean bank-owned homes or remove refuse. We have seen unheated bank-owned homes in sub-zero weather. Homes are frequently in disrepair and missing key components. They can be full of surprises that are only discovered after the closing.
Some foreclosures are in better shape than others, but the buying process is almost always cumbersome. . Clients make offers and wait for weeks to find out if the offer was accepted.
It is a myth that all bank-owned properties are a bargain -- some are, but many are not. The bank-owned homes that are priced very low often need so much work that the cost of the repairs is more than the value of the home after the repairs are done.
The bottom line is that every property ultimately sells for its market value, based on its location, condition and amenities. Unless one is seeking a real fixer-upper, most foreclosures are not such a great deal.
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