At a recent Real Estate Seminar on foreclosures in Rochester, NY there was a discussion about the myths regarding foreclosures. All Real Estate is Local. And that holds particularly true for the laws surrounding foreclosures (particularly involving bankruptcy).
Upstate New York generally did not experience the irrational exuberance of much of the rest of the country and the sub-prime mess has only had indirect effects. Here are New York's Top Ten Foreclosure Myths (Maybe your state has its own myths):
1) Paid Foreclosure Listing Sites (Some of the top 20 most visited Real Estate Websites) have the best deals and I should join. Locally the inventory of the paid sites are not up to date. There is usually a local publication (In Rochester it's The Daily Record) which lists all the foreclosures and when they're coming up for auction on "the court room steps" (Monroe County Court House).
2) You need to pay the full purchase in cash. Cash is King in foreclosures too, but you don't have to come with all cash. You can be pre-approved by a bank for your mortgage. In Cash vs Finance deals, Cash has more power and strength usually wins again.
3) The bank wants to get all they've invested in the property. In an ideal world this is true. But the foreclosure land is rarely an ideal world. What the bank wants and what the bank gets are 2 different things. Just like most investors, the banks won't move off their price right away. But in several months, with carrying charges for the home being about 1% per month, banks are much more likely to negotiate.
4) Foreclosures are disasters and they all need work. Some foreclosures are disasters and some aren't. But "As Is" means "As Is". Look before you leap. The banks hold all the cards, so be confident in your hand before you deal.
5) You can have a property inspection, just like a residential property. You'll get a smile out of the banker if you make your purchase offer contingent on a property inspection. Take your inspector or your contractor on your inspection.
6) A property disclosure is required by the bank, so I'm safe and protected if I don't find something. Banks may disclose,but in NYS they are not bound to disclose and "As Is" still means "As Is".
7) You can close on the foreclosed property whenever you want. Again, the bank holds all the cards. This is one of the few areas where "date certain" means"date certain". "Drop Dead Date" also means "Drop Dead Date", and your deposit is now the banks money. Bankers often get bonuses to close by the end of a month and there's often a fine of $100/day for delayed closings.
8) I'll put a home sale contingency on my foreclosure offer. This also makes the bankers smile. You may be able to negotiate a mortgage contingency, but you won't be able to get a home sale contingency.
9) I can low-ball the bank and the bank will still consider my offer. If you have a Realtor representing you they must submit your offer. An early low-ball offer will usually get a full price counter. Low-ball offers are much more likely to be accepted after the bank has had a home on the market for several months.
10) Buying foreclosures is easy, like on TV. It's not like all those other get-rich-quick shows I see. It's so easy a Caveman with a 600+ Credit Score could do it. If it were so easy, why don't they just send someone to your market and buy all the foreclosures?
Remember those old Real Estate foreclosure sayings/warnings:
- "A fool and his money are soon parted" (Ben Franklin, aka Poor Richard)
- "If it's too good to be true, it probably is".
- "Cash is King". And "It's good to be King." (Mel Brooks)
- "The Comps don't lie"
- "Don't try this at home." (Old NAR/Realtor Proverb)
Posted by: Cliff Jacobson
Adapt Or Die!
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