Wednesday, August 8, 2007

Foreclosures

A lot of people ask me about foreclosures. They want a "good deal."

From today's Strib article about Invest St Paul:

The city experienced more than 1,100 foreclosures from January through July and currently has 1,200 vacant buildings.

There have been so many foreclosures that the Sheriff has had to hire extra staff to complete all of the paperwork. (Yes, the Sheriff is actually the one that "sells" the property back to the bank.)

Here's the interesting thing about the foreclosures out there today: many of them are priced above market value, because the previous owner bought the home when the market was high and supported the price. Prices have fallen in some neighborhoods. Also, when people are foreclosed, they don't leave the property in a very good condition. That affects the sale price.

I did see one foreclosure that had the tub, toilet, tile, switchplates, lighting fixtures and other pieces removed from the house. It was pretty ridiculous -- the switchplates?? Those babies are 30 cents each at Home Depot.

I've also watched a foreclosure listing in my neighborhood drop the price by over 38 percent. The previous owner paid over 50 percent more than the property is currently listed at. And the thing won't sell. It's not a high-priced house, either -- 38 percent is more than $100,000 in this case. And it is still priced too high for the market to absorb it -- no one will buy it for almost half off of what someone paid for it a few years ago.

So, no, not all foreclosures are a "good deal."

It can also be difficult to purchase a foreclosure, which I will talk about later. If you really were getting a good deal it might be worth the work it would take to purchase the property, but so many of them are overpriced right now. You're better off to look at other things that don't require negotiation with a bank.

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