“Dumbest thing I’ve ever done”; “we’re surrounded by renters, still many vacant homes in here two years later”; “we found mold in all of the HVAC ducts after we closed”; “we missed a major foundation issue that killed us”; “roaches took months to eradicate, still finding termite damage”. Informal surveys show that around 80% of foreclosure buyers regret their purchase. Stuck in areas that haven’t appreciated, many are underwater or about even after the cost of required repairs but not considering all of the nonsense they went through. As we have said for years, foreclosures are a sucker bet and best left to professionals.
The single most important thing to NEVER forget is that banks NEVER lose money. Even at the height of the crash, banks were posting "losses" but those were actually offset by mortgage insurance on bad loans, tax payer bailouts, Washington incentives, the options to chase deficiency judgments and of course, retention of the foreclosed home. "Too big to fail"? Please.
Banks know that buyers are entranced by the term "foreclosure"; that this intimates bargain prices. They also know that in many cases, these buyers are not especially savvy to the real estate process and are less likely to know how to properly select a real estate agent. An agent not experienced with how lenders work, how to look for trouble in foreclosures, how to properly analyze the market area....is an agent that will lead a foreclosure buyer into trouble. And that happened and is happening quite often - to the most vulnerable buyers; those inexperienced often first timers.
Don't be seduced by the siren song of foreclosures; they are not the bargain many think for many reasons including:
- Banks don't lose money. They will not price a home at a loss.
- REO homes are sold "as is - where is" with no recourse.
- Location and micro market value trends are the most critical factor when buying a foreclosure.
- Banks know that buyers focus on "foreclosure" and are not usually savvy to the unique nuances.
- Legal problems like title clouds, unknown easements or encroachments or other issues are often present and not disclosed.
Hank Miller discusses these and more in his article "Buying a Foreclosure was the Dumbest Thing I've Ever Done". It's an eye opening overview into the dark side of buying what is often a pig in poke. Most buyers would never do it again, find out why.
THE HANK MILLER TEAM COUNSELS HOME BUYERS AND SELLERS IN THE ATLANTA AREA WITH OVER 25 YEARS OF SALES AND APPRAISAL EXPERIENCE.
