Buyers Misconceptions in Foreclosure and Negotiations

October 12, 2011

Buyers Misconceptions in Foreclosure and Negotiations

Foreclosures and Negotiations

Raise your hand if you think we are in a buyers’ market…..

Okay, I think most of you did, but what exactly does this mean? We see countless buyers through our office regularly. The consistent theme is that they are looking for a deal. “Show me the foreclosures, I know you can buy them for pennies on the dollar”. (I wish I could find the late night TV show that advertises this, because, for the most part, in our area, it is deceiving!)

Let me first start with some of the pitfalls we saw for buyers during the sellers’ market:

1. Very few homes for sale, so limited choices

2. Had to decide whether to make an offer or not very quickly or home was gone

3. Very little negotiation in price

4. No room for negotiation in repairs

So, it would stand to reason that in a buyers’ market, the opposite of these points should apply. However, there are limitations to degree of opposite! There are plenty of homes for sale, so you should have great options, but everyone is looking for a deal and everyone is looking at foreclosures, so you will need to make a decision relatively quickly when looking at these homes. The corporate entities that end up owning foreclosures get appraisals in advance of pricing homes, so they are fairly limited in their negotiations, and they sell them “as-is, where-is”, although there are occasional repairs made if it is necessary to obtain financing.

It is often a surprise to home buyers’ that believe the can write a low offer to find the foreclosure seller is not quite as motivated as they have been led to believe. Buyers might consider looking at standard sales as well, there are plenty of anxious sellers that know they have to compete with foreclosures and short sales and may very well negotiate easier than the corporate entities. Standard sellers may also consider some repairs and you may end up feeling like you have struck a better deal on a home that has been loved and cared for.

When you are ready to begin looking, discuss with your real estate agent what kind of home you are looking for. Then schedule showings on all of the homes that meet the criteria you have outlined, weigh the market where you are, and put an offer on the home that makes the most sense, regardless of whether or not it is a foreclosure or short sale. The end result may surprise you!