What are foreclosures and why do they happen?
To make it simple, foreclosures are properties that have been repossessed by the lender. The buyer fell through with their obligation to make payments, which can happen for a variety of reasons.
Whether someone has an accident that impedes their ability to produce income, they lose their job, or they are going through some other hardship, there are many ways for a person to find themselves in this position.
The bottom line is that if payments are not made, the property will be foreclosed upon. This is why my team and I tell buyers at closing that, “If you don’t pay, you don’t stay.”
Once the lender takes a property back, it is considered an REO (real estate owned by a third party). On the MLS (the multiple listing service), professionals actually have the ability to see whether or not a listing falls under this category. Since this information isn’t available to consumers, buyers will need to trust the help of a professional to locate foreclosure properties for them.
In fact, I often receive calls from people saying they want to look at foreclosures. My first question to them is, “Why?” Most people tell me it’s because they want a good deal. At this point, I tend to encourage them to look at other homes. I will certainly pull foreclosed homes for them, but I like to show clients that I can also find them great deals on listings that aren’t REOs.
Generally, my opinion about foreclosures is this: Before someone has stopped making payments on a house, they have probably also stopped maintaining the house. People who don’t have the money to make payments will likely also not have any funds to make sure the house is in good condition. The maintenance of foreclosed homes is almost always delayed maintenance.
Despite this, there are a few benefits to foreclosure listings. From my perspective, I like that foreclosure properties aren’t being listed by an emotionally attached seller. The bank wants to get rid of this property, making them easier to negotiate with. That being said, most foreclosure listings are sold as-is.
Whether the property a buyer is looking at is a foreclosure listing or not, I always advise them to get a full inspection. Going so far as to turn the utilities back on in a foreclosed home to do so is definitely worth it.
If you have any other questions or would like more information, feel free to give me a call or send me an email. I look forward to hearing from you soon.