Wednesday, March 4, 2009

Mission Viejo Foreclosures

Mission Viejo has not been immune to the wave of foreclosures we are seeing around the country. My quick search this morning showed just under 500 homes that are bank-owned. Do you think that a bank-owned home is your best investment? Maybe...maybe not!

Bank-owned homes do tend to be very aggressively priced. This is because asset managers do not want to have these files very long. Although they are responsible for the ultimate price they get, and the loss involved, they are also responsible for the length of time these homes are on the books. So they will price the home very well compared to other homes in the neighborhood. But there are pitfalls with offers on these homes.

First, the market in Southern California, including Mission Viejo, is for bank-owned and short sales to be priced below what the seller wants to get for the home. A typical home might be priced 5-10% below the ultimate selling price. This is confusing to many buyers who hear about the "buyer's market" on the news. What many buyers don't realize is that the buyer opportunities are already reflected in the asking price.

Banks expect to have a selection of buyers lined up within a very short time of listing the home, and expect to sell for over asking price. The buyer needs to determine how much a particular property means to them. If this is a dream home and they are very serious about getting the home, they need to go into the offer process very strongly. If it's simply a "home that will work" then we should position ourselves accordingly. Many times the original offer will fall through and then we could be the only offer left and can get a better price at that time.

Other problems with foreclosures involve the condition of the home. Every listing will list the home "as-is" but this does not mean you must buy the home sight unseen. You will have the opportunity to have the home inspected by a licensed home inspector....and sometimes the bank will give an allowance for a significant problem such as mold or foundation issues. Normally, you are going to be refused any repairs and few banks are even doing termite inspections now. So you need to be very careful about the home inspection, unlike a "normal" sale, the bank has never lived in the home, has no disclosures to give you about past problems and has very little, if any, liability if there are problems after the close.

All this being homes can be a great investment, can be significantly lower priced, can be in good physical condition, and should be considered when buying a home...but be very careful how you use the contingency period to do your homework, and make sure you are working with an agent who can help you.

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