Perception Of “Foreclosure and Short Sale” Being DEALS In Today’s Market

July 27th, 2013
By Deborah Weiner

One of the common things buyers look for in a home is a “deal”, and naturally, one would think to get a deal, you should focus on foreclosure and short sale when looking to purchase a home. While that may have been the case a few years back, when home buying came to a near standstill, foreclosures and short sales today don’t represent the “bargains” they were a couple of years ago.

When the banks were competing with normal sellers back in 2010, banks could afford to dump their inventory as they would continue to reduce the price until it sold, regardless of loss or “fair market value”. For instance, if a bank was sitting on a home for more than 90 days, they would typically start to lower the price by $10,000 each week until it sold, regardless of how many times they reduced the price. This led to “bargains” and you could get a home that already had equity in it when you purchased it, or another words, you already made money because you bought it so cheap that when the market recovered, you made $100,000 on the sale. Seller’s, on the other hand, had to stick to their price because they had to pay off the mortgage.

In today’s market, banks know the market has recovered. Therefore, when they take a foreclosure back, they ask us, the Real Estate Agent, what to price that foreclosure in today’s robust market. We value the home at “fair market value”, because we know it will sell. No longer will the bank discount like they did in years past, because they don’t have to. They have a roaring market back on their hands and they are not going to give their homes away anymore. Same for a Short Sale. No longer are the banks willing to discount the note or “mortgage” on the property, as they know they will get fair market value or the majority of their investment back.

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