Until recently, buying foreclosed property was “a game mainly for real estate professionals trolling the market for desperation,” said Jennifer Openshaw in Marketwatch.com. Now that hard times have come knocking on the doors of nice homes in desirable neighborhoods, the foreclosure market is attracting ordinary buyers—particularly first-time buyers. As with any real estate investment, location is critical. “Not every foreclosure in every neighborhood is an opportunity.” The best bargains, says Lincoln, Calif., real estate broker Charles Vines, are in newer neighborhoods where homes sold above the area median in 2005 and 2006.
The housing slump may be bad news for most real estate agents, but those who specialize in foreclosed property are “thriving,” said James R. Hagerty in The Wall Street Journal. Nationwide, lender-owned homes represent roughly one out of nine houses listed for sale, according to First American CoreLogic. “In some places, sales of lender-owned homes or ones threatened with foreclosure are dominating local markets.” In Las Vegas, foreclosure-related transactions accounted for more than half of all sales in Las Vegas in March, according to the Greater Las Vegas Association of Realtors. In Miami, they’re “the only game in town,” says Larry Salas of All-Star Realty Sales.
With foreclosures rising, more homes are going once, going twice, and getting sold at auction, said Christopher Palmeri in BusinessWeek. At a recent auction at the Los Angeles Convention Center, 119 properties sold in four hours—“nearly one house every two minutes.” The pace is “fast and furious,” but bargains are abundant. “A four-bedroom house in Palm Springs that had previously sold for $1.2 million went for $625,000.” Don’t let the promise of a deal get in the way of doing due diligence, however. Before you bid, inspect the property and review inspections and appraisals. The purchase agreement should give you an out if the house is flawed or financing falls through. Use comparable sales to determine what the house is worth—and don’t exceed your maximum price, no matter what.
