Buyer: I’m thinking about buying a foreclosed home. Foreclosure homes in Savannah, Georgia have to be dirt cheap, right?
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Realtor: There are a lot of benefits to buying a foreclosure, but there are a lot of misconceptions too. Luckily, I’ve sold hundreds of REO properties in my career, so today I’m going to tell you what you need to know about buying a foreclosed home.
Buyer: The banks are so desperate to get these houses off their books that they’re going to sell them for pennies on the dollar. I’m going to get a mansion for like $150,000.
Realtor: First of all, you need to stop watching late night TV. The bank is already taking a pretty big loss. The homeowner stopped making their payments. They had to incur legal expenses with foreclosing on the property. They are now paying the water bill, the electric bill, the gas bill, paying somebody to mow the grass. They are paying back property taxes and any HOA liens, things of that nature, so they’re already taking a fairly sizable loss. They’re going to try to recoup their losses as much as possible.
Realtor: Does that mean they’re going to be unrealistic with their asking price? Most of the time, no. They are going to have the property appraised, and they’re going to hopefully list it at a reasonable price, but they’re not going to give the property away, and they’re certainly not selling it for pennies on the dollar.
Buyer: Yeah, but they just want to get these properties off their books, so they’re going to sell them dirt cheap.
Realtor: Yes, they do, but not at the expense of losing an additional, 20, 30, $50,000. If the property is in good condition, there’s no reason for them to steeply discount it. If the house is a nice house that any buyer would love to have, there’s no reason for them to discount it. They’re going to sell it at fair market value or pretty darn close to it.
Buyer: Yeah, but they just want to get these properties of their books, so they’re going to give them away.
Realtor: If the house has been vandalized or needs extensive repairs, they take that into account when they set their asking price. They don’t just pull their price out of thin air. They actually have it appraised prior to putting it on the market. Now, are they always reasonable? No. They are not. Sometimes there are investors on the back end that insist on trying to list the property as high as possible because they’re trying to recoup their losses, and they have to do a price reduction just the same as any other home seller would have to do.
Buyer: Okay, but if I pay cash for the house, they’re going to give me a huge discount, right?
Realtor: No. Not necessarily. Again, they would love to get a cash offer, but they’re not going to give you a 10% discount off of the asking price just because you’re paying cash. If they are looking at a cash buyer versus a VA buyer, and the prices are roughly the same, they will probably go with the cash buyer because it’s a sure thing. There’s no financing contingency, and there’s no appraisal contingency. If the cash offer is $20,000 less than the VA offer, they’re probably going to take the VA offer even if it takes a little bit longer, and even if there is a risk that it might not appraise. They’re going to go with the higher price, because, let’s face it, it’s all about the bottom line.
Buyer: What about buying a foreclosure with an FHA loan?
Realtor: You can absolutely buy a foreclosure with an FHA loan, or a VA loan, as long as they are not complete and utter fixer uppers. If you need to get a mortgage from your bank to buy this house, it has to be safe, secure, sound, doesn’t have health and safety issues. It can’t be missing a kitchen. I’ve sold foreclosures before where the homeowner was angry that the bank foreclosed, and they stole all of the kitchen cabinets and all of the appliances before they moved out. You watch into the kitchen, and it’s an empty room. Will you be able to get a loan for that house? No, because they consider it uninhabitable if you can’t make meals in the kitchen because there is none.
Buyer: There must be tons of foreclosure homes in Savannah, Georgia.
Realtor: Well, I wouldn’t say a ton, but I just ran a search a few minutes ago, and as of this moment there are 25 active and coming soon foreclosures in the Savannah metro area.
Buyer: I see foreclosures on Zillow all the time, and there are tons of them.
Realtor: This is a total misconception, and it really drives me crazy. The big portals will say that the property is a foreclosure, but that’s not true. Just because the homeowner is behind on their payments does not mean that their house is for sale. It just means they’re not making their mortgage payments on time. When you see them on the portals, it doesn’t mean that they’re selling their house. What are you going to do? Just walk up to them and ring their doorbell and say, “Hey, I see you’re behind on your mortgage payments. I want to buy your house”? Let me know how that works out for you.
Buyer: Can we go see some foreclosures anyway?
Realtor: Of course. In fact, if you would like a list of all of the REOs that currently for sale in the Savannah metro area, just click this link right here and I’ll get that sent over to you right away.
Realtor: Thank you so much for watching. My name is Karin Carr, and I’m a Realtor® with Keller Williams Coastal Area Partners here in the Savannah metro area. If you are interested in all things real estate in the Savannah area, go ahead and click that subscribe button because I put out new videos every Monday. Thanks so much for watching us, and I’ll see you on the next one.
About the Author: The article above was provided by Karin Carr, an authority on Savannah area real estate and a leader in the field of real estate blogging and vlogging. Karin has helped literally helped hundreds of families buy and sell homes since 2005.
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