Foreclosures in Sarasota have been dropping over the past few years. Of the 6477 listings on the market at the time of this writing, only 253 are foreclosures or about 4% of the market.
When a property comes on the market identified as a foreclosure it draws all the bargain hunters out. Some lenders are under pricing their listings and require a minimum days on the market from 5 to 15 days before looking at any offers. For example, we recently showed a new foreclosure listing on Friday. Our offer was one of 12 competing offers on Monday. This is not always the case but when it happens the listing will tend to sell for above the asking price.
You will need to have your financing in order or have a recent bank statement showing you have the funds available if you’re purchasing for cash. An approval or proof of funds must accompany all offers on foreclosures. Failing to do so will cause the offer to be rejected regardless of the offer.
If your offer is accepted we will be notified verbally by the asset manager handling the property. In a few days we will receive an addendum (now about 13 pages) which spells out the terms of the sale. Expect this to say the bank knows nothing, they cannot be held accountable to anything and you bear the responsibility of the property after closing without recourse. They always allow you to perform an inspection. It comes across any handed but any attempt to change or negotiate items on the addendum will cancel the approval in most cases.
Some of the higher priced listings are occasionally overpriced. There may be condition issues that the asset manager has not been made aware of through their field reports. Generally foreclosure properties will undergo regular and incremental price reductions. Trial and error tells us lenders will generally reject offers less than 10% under asking. They would prefer to lower the price to see if it also in new buyers in a lower price range incrementally and take a big hit. Perhaps their compensation is based on the list price the sales price ratio.
You can also expect the asset managers for the banks to be tough negotiators. They will always counter your initial offer. You might be able to take advantage of end-of-quarter or end-of-year motivation on the asset managers’ part. Often times they may be trying to hit certain quotas and agree to something more beneficial to you under these circumstances.
Many times banks will insist on you closing with their preferred title company or attorney. We have found that many times the banks' closers are also the firm that did the foreclosure in the first place. We have a concern that this might be a conflict of interest or least not in your best interests as a purchaser. In these cases you will still have to close and place your escrow deposit with who they pick. We feel it is best in these situations for you to consider hiring an attorney to review the closing documents and the title insurance policy prior to closing. This can be done for a few hundred dollars. With all the media coverage concerning forged documents being used in foreclosure filings, this may be money well spent having your own professional review the legal documents.
The relatively small percentage of foreclosures has affected the over all market in all categories. We suggest that you not limit your search to just foreclosures. Since homeowners find themselves competing with foreclosures, they tend to adjust their pricing accordingly. Not the same, just accordingly. Non-foreclosures have a benefit that the owners have cared for the home, you don’t have to buy it “as-is”, and many times you can get repairs done from the home inspection. What you are looking for is the best “value” which the price of the home is only a part. There is no deal in a foreclosure if after make the repairs and take on the risk of an “as-is” sale, you might find buying a normal re-sale the better buy.
You don’t need to shy away from purchasing a foreclosure. We are here to help you through the process.