Are foreclosure homes a good buy? - Cincinnati News, FOX19-WXIX TV

Are foreclosure homes a good buy?

By Dan Wells - bio | email

If you're in the market for a new house, a foreclosure listing can be considered a great buy, right?

Armed with the idea that foreclosed homes are a great investment opportunity because they're cheap and there's a ton of them on the market right now, potential home buyer Michelle Hines thought it would be a great opportunity to find a house.

"I just happened to know someone in the neighborhood, and they told me about the home, so I looked into going to the commissioner sale, looked into what it would take to buy the property, did all the research, made sure to know what the price of the appraisal price was, made sure I knew what liens, if any, were on it, and what the process was," said Hines.

But after weeks and months of educating herself, Michelle found there's three different stages of foreclosure, each of which presents different opportunities for buyers.

The first is pre-foreclosure. That's when a borrower has fallen behind on his or her payments, but the house has yet to be auctioned off. In this case, short sales can be good for a buyer because for a seller it makes more financial sense to liquidate early rather than go through the whole foreclosure process.

The next stage of foreclosure means homes in default are auctioned off at your local county courthouse, and that's where Hines got to. She thought her dream home could be real bargain, but the process turned out to be a crap shoot.

"Unless you can find one where they have the bank has less mortgaged out on the home than what the appraisals is, the bank is going to buy the property back at more than the home is worth," said Hines.

And that is exactly what happened. She wanted to pay the appraised value of this home at $225,000k, but the bank out bid her at $260,000. The actual value for the neighborhood is about $280,000.

"Usually the value is less than the mortgage amount so we're in an upside down market so there are more properties going back to the bank and there are more opportunities for investors to buy them after the banks own them," said Tom Singer with Huff Realty.

"The overall take away with the up to commissioner sale is the process is a really a waste of your time," said Hines.

The third stage is post-foreclosure. That's after a lender takes back the property and it goes back on the market as a real estate owned property. These are treated like ordinary sales, listed with a broker. Typically, bargains are not as good, but experts say it is buyers market.

"We sold probably 150 to 200 foreclosed properties and seems those numbers are going up," said Singer.

Bonnie Overbeck with Huff Realty says she writes about 10 contracts a month on foreclosed homes, and says they market could stay that way for another three to five years.

"I probably write 10 contracts a month on foreclosed homes...is that surprising to you ...no...is it going to get worse...is it going to be a higher volume....probably...you probably got another 3 to five years of it."

"I would say a year ago, you had 30 to 60 to 90 days to deal with these banks in a foreclosure situation," said Overbeck. "But banks are getting flooded and they're getting more negotiable, so some of your lenders are responding in a more timely manner. I say you could be seeing 45 days from submission to closing."

Finally, real estate experts say there's safety in real estate owned properties because the process is so clean; the title is clear and the property is delivered vacant.

So whatever why you buy a foreclosure properties, it's certainly become a real red-hot section of the real estate market. It just may not be as easy as it being portrayed.

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