Foreclosure Real Estate Secrets
February 3rd, 2008
First time buyers of real estate are salivating at the idea that the Buyer’s Market in Massachusetts is offering “steals” in every neighborhood. They hear of foreclosures, auctions, and people unloading property at every turn.
This is not only a falsehood, but when buyers learn of the process, they usually run for the hills.
Let me explain how foreclosures work…
Home owners who do not pay their mortgage over time will have the bank try to take it over or sell it. The process is known as foreclosure, and the first attempt to sell the property is known as the auction.
The auction is advertised in a legal section of your local newspaper. To participate, you would bring a deposit check to the event. The bidder than stands on the curb and raises their hand if they are willing to pay x dollars for the home.
Notice how I did not say anything about looking inside the property, inspection conditions, or financing contingencies… this is because they don’t exist! You buy sight unseen, perhaps someone will still be living there when you end up buying it, and if you don’t show up in 30 days with payment in full, the deposit is retained by the auction house.
Not a great course of events for a rookie home buyer.
A bank representative is usually at the auction also. They are there to “bid” if the bank wants to buy it back rather than allow anyone else to “steal” the property. They will then prepare the home for listing with a local realtor. This is also known as a REO property, referring to the Real Estate Owned department of the bank.
A buyer can now preview the home, conduct an inspection, and negotiate on price, but at this point the bank usually spends a bit of money on the process and still is not going to allow the home to sell for an outrageous price.
There is certainly a lot more REO property in Massachusetts recently, but these properties are not for buyers who do not have financial resources or lack nerves of steel. They usually need at least cosmetic work, but most have quite a few inspection issues. There are companies out there that are in this business full time and they are also going to compete with your bids.
My official recommendation in 2008, stick with the listed properties and do your due diligence on a property you plan on buying. Currently it is a slim margin of benefit that you will receive from buying a foreclosure and not worth it. It may be in the future, just not right now in Metrowest Boston.
Contact me if you have questions or concerns about REO properties or click here to view listings on the MLS.
Categories: Ashland, Framingham, Grafton, Holliston, Hopkinton, Market Conditions, Marlborough, Milford, Natick, Real Estate, Southborough, Westborough
This entry was posted on Sunday, February 3rd, 2008 at 2:38 pm and is filed under Ashland, Framingham, Grafton, Holliston, Hopkinton, Market Conditions, Marlborough, Milford, Natick, Real Estate, Southborough, Westborough. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
The other thing that any buyer thinking about buying a home at a foreclosure would want to do is a title search. The last thing you want to end up with is a title nightmare!