Repo Homes Can Be Turned Into an Opportunity
Posted on June 13, 2008
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With initiative and imagination, repo homes can be turned into an opportunity. Today properties are going for a song – it is the early bird that catches the worm.
There are many ways of snapping a deal but one must know the trick. Today the rates are below 30% to 50% from the market value. The point to ponder is why are the banks offering such huge discounts. Banks are no fools. They know that to foreclose on a house worth less than $100,000 will make the bank cough up $50,000 in legal expenses and repairs. Therefore banks are fighting shy of foreclosures and trying to offload as many units as they can. Holding on to houses means extra trouble in the form of maintenance and taxes.
For the buyer there are three steps to going about buying a foreclosed house. The best is shop during the pre-foreclosure stage. The borrower is saved from the stigma of foreclosure and the bank is spared the legal expenses. Thus both parties will be only too eager to come to an agreement with the third party buyer. Needless to say, the buyer will offer far less than the market value of the house. Banks usually do not haggle and quickly agree because their primary aim is to get the house off their books.
The second alternative is to opt for a REO (real-estate-owned) house. At this point the bank will want to take back the $50,000 spent on the foreclosure process. This together with the actual value of the house might make the asking price prohibitive. For those who want to buy a house to make into a home, REO houses have certain plus points. The bank has made genuine efforts to repair the house – new carpets and floors apart from fittings and fixtures. Moreover there is no lien on the houses and the taxes are current.
The third chance is to bid at an auction. But here the best deals are not always available. The auction houses deduct a certain percentage. Not all the companies are reputable and one may not get a chance to thoroughly inspect the unit. Down payment and quick financing will be required. Even then regrets might follow. There is the danger of getting infected by the ‘auction mentality’ and start shouting for fun without thinking.
The basic point is that like stocks one has to buy houses cheap and build up the equity. Foreclosure gives that great opportunity.
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