Foreclosures and Bargains: Is it possible?

If you have had a chance to watch any of the real estate infomercials over the past years, many times the people on the videos talk about foreclosures. They mention that they get the greatest deal from a foreclosures because the banks just want to get rid of them. And so they sell the houses to buyers at a great discount.

The reason I wanted to talk more about foreclosures is because of this article on Business Week (Click here for the piece). With a headline like this, why would you not look into them: Even in affluent communities, foreclosures often offer a chance to buy a luxury home for as much as 40% or more off the market value

The problem is, I don’t know if I really buy this story. Their first story is one where they talked about a house in Las Vegas. It sold at the end of 2006 for one million dollars, got foreclosed on, and recently sold for $500,000. When looking at those numbers, it is obvious that one of two things happened. The initial assessment of the house was way off and it was worth a lot less than the recent owners thought. The second theory is that the people that lost the house completely trashed it and everything in it.

I recently saw a house in the Denver area that had sold for $210,000 in 2007 and was recently purchased as a foreclosure somewhere around $140,000. Yes, the bank probably did end up losing a great deal of money on the house. It had been knocked down $30,000 within the last few weeks. But again, the house had to have some issues that may or may not have been caused by the previous owner.

The experience that I had with a foreclosure, which I have mentioned before, regarded a house that we found and really liked. It had a lot of minor problems but nothing really major. After reading about foreclosures, I was under the assumption that the bank would just want to get rid of this as soon as possible.

That definitely did not end up being the case as the counter offers we received were a joke and we eventually moved on. The house eventually sold in the fall for somewhere around $6,000 under our highest offer. This was also after they did some work in the back yard that had to cost a decent amount of money. In that situation, the bank certainly did not want to sell as soon as possible.

But with the foreclosure numbers increasing in most bigger states (Especially ones with high property value), there could be more chances that you are able to get a deal on a house. The problem is that you likely have to do some work on the house once you purchase it.

As a friend said about the foreclosures he saw recently, it seemed like everyone of them had at least one hole punched in the walls. What that means is that if you are in a dire financial state, why not tear the house up? The bank is going to take the property away from you one way or another. It is not going to hurt your credit more if the house is perfect or it is trashed.

That is what makes finding a foreclosure with a reasonable price tag sometimes a problem. The banks rarely look at the house to see how many issues are involved with it. They see the assessment and how much the person owed on the house. They don’t take into account how many minor issues are involved.

Finding a bargain in a foreclosure is going to be a difficult test. You will have to look through a lot of houses and eventually be disgusted by some of the things that you will see and smell. But if you get lucky, you may find that diamond in the rough that you have been looking for. So yes, I think it is possible. It won’t be easy, but it is a possibility.