Are Short Sales, Foreclosures, and REOs Really Good Deals?

This Hawaii Kai condo is a short sale (MLS#1011681) currently available for $599,000

Are short sales, bank owned properties, and foreclosures really good deals? The correct answer is depending on what kind buyer you are.

For a first time home buyer with less than 20% down payment, that needs in a short period to enjoy the home, it is very hard for getting a deal on short sales, REO properties and foreclosures.

This Hawaii Kai house is a short sale (MLS# 1100811) currently available for $699,000

Here is why:

1. Because those sales may need over three months or more waiting period to get bank approval. We have all heard the line that banks don’t want to be in the business of owning homes. That may be true, but they are in that business, whether or not they want to be. As a result, they are not giving houses away at pennies on the dollar. In fact, bank-owned homes, as a rule, must be sold at as close as possible to their fair market value. Banks and their Wall Street mortgage investors do this by exposing the property fully to the market, rarely accepting low ball offers, and only lowering list price in fairly small increments after listings fail to sell after 60 or 90 days (plus) at the pre-reduction price.
2. Most bank don’t pay anything for condo document fees, termite inspection fees, escrow documents fees etc. Buyers need to carry on all the seller’s duties.
3. Most properties under short sale, foreclosure, REO need to fix, remodel, etc. After purchasing, a home buyer may need to spend more money than you think is a good deal.

In Kakaako, this short sale condo (MLS# 1104322) is currently available for $495,000

While foreclosed homes do sell for less on average than a “regular” sale, they are also often in worse condition. Banks are virtually always less negotiable on pricing, repairs, and other terms than individual sellers.

The fact of the matter is, that some of the best deals on today’s market are to be had via negotiations with realistic owners of non-distressed properties who are really willing and able to make a deal.