Sorting through the foreclosure myths.

     I’d like to dispel a number of myths about Foreclosures in the current market. I can’t tell you how many calls I get inquiring about a “magical” list of foreclosures.  There’s tons of websites out there claiming to offer foreclosure information, problem being there usually is a fee involved and its not necessarily properties that are actually in foreclosure, it can be simply people that are behind on their mortgage payments.  Here in Connecticut, the best ways to find foreclosure is to have a Realtor ®.  Contrary to popular belief almost all foreclosures are listed in the MLS as soon as they’re available for sale and a Realtor® can help you figure out what is a foreclosure.   

     Another misnomer about foreclosures is that the banks will just take any offer they get. Unfortunately that’s not the case. Foreclosure can be a lengthy process, once a bank begins the process it can still be a few months before it goes on the market.  For pricing it, the bank gets 3 separate values, 1 from a licensed appraiser, another from the listing agent and the other from a random Realtor®, called a BPO, (Broker price opinion) the bank will take the average of the 3 prices.  Within the first 30 days of a listing the banks usually won’t waiver too far from the price, if at all.  As time goes on they are a LITTLE more willing to move on the price, but  unlike someone in a situation who has to sell, the banks have more money than the average consumer that needs to sell and they can sit on it and wait till they get closer to what they want. 

      The third problem with Foreclosures is the condition of the property its not usually the best.  Vandalism and theft are some of the biggest contributors to the poor condition of foreclosed properties.  Vacant homes are great for thieves, especially ones looking for copper.  They rip the copper piping out of the basement.  If they’re feeling adventurous they will rip the pipes right out of the walls throughout the house.   This can cause a number of problems, besides having to replace the pipes, the sheetrock may need to be fixed/repaired as well. Also they don’t usually shut the water off, so then you have to deal with water damage.  Speaking of water damage, that’s another issue, especially up here in CT, where we have cold winters.  Though most asset management companies (the ones who handle the property for the banks) winterize the property, sometimes its not enough to avoid pipes or radiators from cracking or bursting.  Once that happens the broken pipes have to be repaired/replaced as does any water damage.  With water, you never truly know how much damage there is until you start ripping the walls/ceiling/floors up. 

      The condition of the property plays a major role in the ability to get a mortgage.  If the house is uninhabitable, ie,  no kitchen, bathroom, heating system, plumbing, electrical, major mold damage, water damage or anything else that would make it impossible to live in, you’re not going to be able to get a conventional mortgage. The only way to buy is cash.

     Now with all that said, if you’re up for a challenge and don’t mind doing some work there are some programs out there that help people buy foreclosed homes. HA has a 203K loan that will let you borrow money not only to buy the house, but fix it up.   

     No matter what you’re looking to do, the best thing would be to get a Realtor® to help you navigate through the complicated, yet exciting home buying market