Buyers: Are Foreclosures Really A Great Deal?
This year has seen an unprecedented number of foreclosures and short-sales that are available for sale. The housing market is flooded with both of these homes available for sale, and this year, I’ve had many, many buyers interested in these types of homes. Specifically, some of my buyers this year seemed to zero in on foreclosures, namely due to the advertised sale price.
Foreclosures can be a good deal, but they aren’t necessarily for the faint of heart. Most times these homes need a great deal of work just in order to become habitable. One home in particular that I was in earlier this year with my buyer ranked as the number one, most awful home I had ever been in. Seriously, on a scale of 1 to 10 with 10 being the worst possible ever home I’d seen, this one was a 12! When we walked into the home the first thing that caught our attention with full measure was the distinct and very pungent smell of cat urine. This was not just a little smell, but a “punch you in the nose squarely between the eyes” smell. From what we could gather the foreclosed owner had about six or seven cats and they did their business where they saw fit. The second thing that caught our attention (after gagging badly) was that the owners had left, period. They took nothing with them, the house was an absolute wreck, and it looked as if a tornado had gone through the house entirely. Open, moldy food and trash as well as personal possessions were scattered to and fro. It gets worse… the basement had obviously had a water issue and that in turn brought mold. Lastly, the foreclosed home owner, during better days obviously was an avid fan of HGTV, and attempted many, many home projects, none that appeared to be in good quality.
Remember, if the homeowner didn’t have the money to make the house payments, what makes a person think that that quality would be a consideration in their home improvement projects? Or, equally as important take care of the routine maintenance items that a home requires on a daily basis?
So, with buyers in tow we toured the home holding our noses and wading through, in some instances calf deep trash. The buyer was obviously oblivious to costs involved in turning this “good deal” into a habitable home for her and her children. Consider that while the above grade structure was in decent shape, the roof and studs, just a few of the obvious costs involved to get this home ship shape would be:
- Get a dumpster to get the trash out of the house
- Hire a cleaning crew or seriously sweet talk friends and family members for help
- New carpet and flooring throughout the home
- Replace sub floor and some drywall in areas due to the cat urine soaked areas
- Appliances, all of them were needed
- Mold removal and remediation in the basement
- Replacing mechanicals in the basement damaged by flooding and neglect
- Un-doing some of the previous owner’s “HGTV projects”
Remember, these are just a few of the easy costs to target. Nevertheless, in an easy guesstimate of what it would cost just to make the home livable, in this instance my guess would be a cool $45,000 and that’s being liberal too.
While most foreclosures may not be in this poor condition, what’s amazing are those buyers that will still entertain the thought of purchasing them, because they’re “a good deal”. When determining value, make sure that you consider all the costs involved in the rehabilitation process of the home. There are underlying costs that should be considered. Don’t get me wrong, I’m not saying that all foreclosures are a bad deal, but make sure that common sense is applied. For a complete list of foreclosures and short-sales available in your area give me a call or drop me an e-mail. I can be reached at 262-694-2141, 608-770-4568, or 262-320-SOLD, or at soconnor@shorewest.com. On the web, visit me at www.peteoconnor.com. So, for now, happy shopping and Caveat emptor!
Posted by:
Pete O’Connor
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