The nation's housing inventory is cluttered with foreclosures, short sales and homebuilders willing to make a deal. If you're in the market to buy a home today, you're likely weighing the benefits of each type of
property available for purchase.
Don't be fooled. Not all bank-owned foreclosures are sold at deep discounts. Not all builders are slashing prices. Short sales can be a crapshoot, with some buyers enduring months of waiting and still not getting the
All things considered, it's possible that your best deal is purchasing a traditionally sold existing home, so don't count those out of the running.
To get the most for your money, it's important to understand the local market's inventory; market dynamics will have a lot to do with how various types of homes are priced. Also, do some soul-searching to determine how
much risk you're willing to take and the amount of time and money you're willing to invest in a home.
At the very least, go in knowing what you can afford and in what neighborhood you'd like to live, said Leonard Baron, a real-estate professor at San Diego State University. Since most properties find their way to local
multiple listing services, shoppers also can decide what type of home they'll buy after finding one that fits their needs, he said.
Foreclosures reclaimed by the bank, often called bank-owned properties, are often sold at a discount. However, the size of the discount depends on the market you're in.
There is more than one reason why the selling price of a foreclosure is lower than a traditional home.
The seller is typically a bank, and would like to move (the property) off the books as quickly as possible. A traditional seller is interested in getting a certain price and is willing to stay in the market.
Also, the condition of the home can be an issue. A buyer who wasn't able to make mortgage payments also probably wasn't able to keep up with needed maintenance.
One of the biggest mistakes homebuyers make when buying a foreclosure is underestimating how much it's going to cost to repair it.
It usually costs a lot more than you think. You can add value to a property by rehabbing it, but probably not more than the cost you put into it.
For the lower price, buyers also need to accept that they're most likely purchasing a home that has been sitting vacant, which comes with its own set of issues because
small problems — a leak, for example — can become big ones if no one is there to notice them. These homes also may have limited seller disclosures, because the owner — the
lender — hasn't been living in the home and thus has less information to disclose.
Home inspections are generally recommended regardless of what type of property you're buying, and they're essential in the case of a bank-owned property.
Location matters, too, in the pricing of a bank-owned foreclosure. In places with the highest incidence of foreclosure, bank-owned properties garnered the smallest discounts, compared with traditionally sold existing homes.
Another way to look at it: A homeowner aiming to sell his home in a market where a large percentage of sales are foreclosures will likely have to price it like a foreclosure just to be competitive.
In many markets, the supply of new-home inventory is dwindling. That has caused pricing in the new-home market to stabilize.
That is, fewer bargains may be available for new-home buyers.
There is less flexibility on the builders' side to negotiate prices, plus, with supply more in control, there's not as much urgency to drop prices to move the homes that are currently sitting on the market.
Buyers typically pay a 20% premium for a new home, compared with a traditional (nondistressed) existing home, but that also varies by location.
That isn't to say builders won't find other ways to make a deal. They're still willing to throw in incentives, but if you're looking to get the lowest price on a home, this might not be the best route.
And if there are distressed sales in new communities you're considering, proceed with caution.
You can rest assured with Joyce Klein Realtors we will assist you in your home purchase every step of the way. Taking all circumstances and situations into consideration.
We are here to help you purchase your home with a straight forward ethical and financial approach that is totally beneficial for you - our client.