What to Expect Technically, most real estate taken back by lenders do not go through a "foreclosure" process, even thought this article uses that term because most it is familiar with most readers. Most homes are bought with a trust deed, which makes it easier for banks to get properties back quickly in case of nonpayment. The first step in obtaining property from a homeowner that is late with mortgage payments is to send a Notice of a Trustee Sale. According to a report by the Realty Studies department at ASU, in the first half of 2007, over 8597 notices of trustee sales have been sent to homeowners delinquent on mortgage payments, compared to 11,354 in all of last year.
When most buyers hear the term foreclosure, the greed factor kicks in -
In most cases, the "Pennies on the Dollar" thing is not reality. I've had several offers on distressed properties flat-out rejected by the lender, even though the offers were 30% lower than the latest sold comparables. No counter offer, not even a "try again" response. I was told in one case that the lender had a number in mind more like 15% lower than current value. Though I think lenders are beginning to wise-up, they are still not in that desperate phase that investors prefer.
So once you realize that you're not getting properties half-off, then you'll be in a better position to look at these properties objectively, compared to what else is available in the Phoenix and Scottsdale real estate market.
This scenario is repeating itself all over the Phoenix and Scottsdale real estate market: Investors bought new homes and didn't add any upgrades. Perhaps they rented the home and that cheap builder carpet is now cheap, old carpet. Hopefully there is back-yard landscaping, but if so, it is usually minimal, dull and lifeless. Though these are problems that can go away with money, an investor must purchase these properties at a substantial discount just to upgrade the home to the same standards as other homes in the neighborhood.
Another common scenario is when the homeowner bought a home at full price during the housing boom, even though the home may have a location flaw such as being next to a major road, next to power lines, or backing up to a commercial area. Homes with location flaws must be sold at a substantial discount in a buyer's market, so investors must buy these homes at an additional discount in order to make a profit.
In many cases, you may receive a better "deal" by looking for good properties with motivated owners. These are owners that may have a job transfer, or that have purchased another home and won't mind giving up some equity in their current home just to get out. These homes are typically in better shape and have more upgrades that only a live-in owner will provide. I try to steer my investor clients to a well-located home with a good floor plan rather than a less expensive foreclosure home with a location flaw or a choppy floor plan. You can't fix those things and they make the home harder to rent and sell.
If you are considering a purchase in the Phoenix and Scottsdale foreclosure market, make sure you look at the big picture before assuming that foreclosures are the best bargain. Look at the entire resale market first and look at each purchase with re-salability in mind. Make sure you know what is currently on the market for the area and what it is listed for - recent solds are only half the story.
When most buyers hear the term foreclosure, the greed factor kicks in -
In most cases, the "Pennies on the Dollar" thing is not reality. I've had several offers on distressed properties flat-out rejected by the lender, even though the offers were 30% lower than the latest sold comparables. No counter offer, not even a "try again" response. I was told in one case that the lender had a number in mind more like 15% lower than current value. Though I think lenders are beginning to wise-up, they are still not in that desperate phase that investors prefer.
So once you realize that you're not getting properties half-off, then you'll be in a better position to look at these properties objectively, compared to what else is available in the Phoenix and Scottsdale real estate market.
This scenario is repeating itself all over the Phoenix and Scottsdale real estate market: Investors bought new homes and didn't add any upgrades. Perhaps they rented the home and that cheap builder carpet is now cheap, old carpet. Hopefully there is back-yard landscaping, but if so, it is usually minimal, dull and lifeless. Though these are problems that can go away with money, an investor must purchase these properties at a substantial discount just to upgrade the home to the same standards as other homes in the neighborhood.
Another common scenario is when the homeowner bought a home at full price during the housing boom, even though the home may have a location flaw such as being next to a major road, next to power lines, or backing up to a commercial area. Homes with location flaws must be sold at a substantial discount in a buyer's market, so investors must buy these homes at an additional discount in order to make a profit.
In many cases, you may receive a better "deal" by looking for good properties with motivated owners. These are owners that may have a job transfer, or that have purchased another home and won't mind giving up some equity in their current home just to get out. These homes are typically in better shape and have more upgrades that only a live-in owner will provide. I try to steer my investor clients to a well-located home with a good floor plan rather than a less expensive foreclosure home with a location flaw or a choppy floor plan. You can't fix those things and they make the home harder to rent and sell.
If you are considering a purchase in the Phoenix and Scottsdale foreclosure market, make sure you look at the big picture before assuming that foreclosures are the best bargain. Look at the entire resale market first and look at each purchase with re-salability in mind. Make sure you know what is currently on the market for the area and what it is listed for - recent solds are only half the story.
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