John Shaw, also a realtor at Edina Realty, notes that of the 137 foreclosed properties that Tanner closed in 2007, the average sale price was $192,189—a discount of about 3 percent from an average asking price of $198,665. While that doesn’t seem like much, Shaw says that the vast majority of these sales involved prices that were already down substantially from peak levels in 2006 and also included significant seller concessions. At a minimum, concessions included seller-financed closing costs, which typically run 3 percent of the price of the home.
Shaw and Tanner note that foreclosures are popping up everywhere—from wealthy suburbs such as Eden Prairie to the near-north side of Minneapolis. “The inventory of foreclosed properties has undermined the marketplace,” Shaw says. “And it’s important to us that we get these homes sold in a way that will stabilize the market and the neighborhoods these homes are in.”
« Previous Page 1 | 2
If a homeowner is in default on his mortgage payments, and his lender is amenable to getting the property off its hands somewhat quickly, the home can be sold in a short sale, a process where the homeowner’s lender accepts a discounted price on the mortgage from a buyer. Short sales typically take place when homeowners owe more on their mortgage than the property is worth. This can happen, for instance, if the home’s value has declined but the interest rate on its adjustable-rate mortgage has gone up. In this case, the price may not be as good as it first appears, and the price of the home may actually end up near or above market value due to closing costs, taxes, and fees.
Buying properties going through foreclosure takes more time than the normal home-buying process because straightening out titles, liens, and other paperwork is time consuming, says Barry Tanner, a realtor with Edina Realty. However, buying a foreclosed home can go a little faster in a short sale than buying a regular home.
Foreclosed properties sold at auctions or at sheriff’s sales—where the sheriff’s office acts as an auctioneer for the lender or other party that is selling the home—are sold fast, often at prices below market value. There are some great deals available, but they don’t come without risks. You can’t preview a home that is sold at auction. And even after a home has been sold in a sheriff’s sale, the homeowners have a six-month redemption period to pay off the entire mortgage and all fees, during which time they have the right to occupy the property.
Tanner says one advantage to buying bank-owned foreclosed properties is that they “already have a clear title.” It’s also a little faster to buy from the bank: “We close [bank-owned homes] in a couple weeks or within a month.”
—Katie Harholdt
