Quote:
Originally Posted by MrCallahan
Real estate is something that I've just been learning recently...so I'm definitely no expert by any means. But I've been learning about it, and would like to get into the market sometime soon (either as an owner, or maybe investor). So this is just ramblings, based on what I've read/learned...so take that for what it's worth.
But there's always hype about buying foreclosure homes, because there's this idea that they are cheaper and you can get amazing deals. But from my understanding, this isn't really the case. The banks will take over properties that their owners have defaulted on the payments, to which the bank will turn around and sell at 'fair market' value. So you're essentially buying the house at regular price, but dealing with the bank, rather than owners/brokers and such.
But the trick to get the real good deals on houses, is to actually buy it in its pre-foreclosure state. In this case, the owner is obviously in a very tough point in their life, because they are having a hard time or can't make payments on the property. I would think they are generally wanting to sell the place ASAP, or are at least willing to listen to offers. Of course, you don't want to take advantage of them, but I'm guessing this is the time when you'd probably get your better deals on property. On the other hand, I imagine finding this type of property is a little tricky...scouring ads, or networking with people.
Does this sound about right when dealing with foreclosure items?
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I'll let Realtor1 fill in the gaps, but you are wrong in your analysis. Yes, the bank sells the property at "fair market value", but that FMV is based on the fact that you are buying a property without warranty in an "as is" state. So that said, the price can be significantly cheaper then what a comparable unit that is sold with warranty or available condo documents, etc.