You'd think foreclosures were the only bargain...

I am fascinated by the new view of what a "bargain" is. It was only a few years ago that folks were having bidding wars on properties. Now, some buyers believe if they have to pay a dollar extra each month, they've been had.

There is no doubt, for those in the financial position to do so, this is by far the best time to buy real estate. Housing prices have fallen dramatically since 2007 and interest rates hold steady in the 3-4% range!

One man’s misfortune has been another man’s gain, and that is foreclosures. Many people are attracted to these properties because they have dollar signs in their eyes. They believe the added equity in the purchase of such a “bargain” leaves them in the catbird seat. However, most foreclosures were held by folks who were struggling to pay their mortgage. Is there any reason to believe that these homes were kept up by the occupants? If they couldn’t afford the payments, they certainly wouldn’t be able to afford any upkeep or repairs.

Assuming there are very few “gems” as foreclosures and most need quite a bit of work, any bargain you may get will quickly evaporate as you invest $10,000, $20,000, $30,000 to get the home into a livable condition. For the most part, foreclosures are great for investors who are experienced and can quickly assess the “damage,” determining how much to fix and whether to flip or rent. They also have the capital as this is their livelihood.

On the other hand, foreclosures are not ideally suited for first-time homebuyers. That’s not to say first-time homebuyers should never consider a foreclosure. However, between saving money for the downpayment (if any), the money brought to the closing table (tax service, inspections, appraisal fees etc…) and the new fridge, moving truck and new blinds, the first-time homebuyer is too often tapped out.

There are many fantastic deals out there that are owner-occupied, ready to move in. These houses often are in pristine condition and with the right Realtor^®, the owners can be convinced that taking less than the asking price is a smart move for everyone. Plus, the smart Realtor^® will have already convinced the seller to price the home right from the get-go.

Although banks have a magic number they want to attain and likely place the offering price in some sort of formula, the owner-occupied listing should have received a heart-to-heart talk from their Realtor^®, explaining to them a “bottom dollar” or “magic number” is unrealistic if you want to sell quickly. Sometimes, taking a loss is the only alternative to waiting. And if you've got a mortgage on the home, you've paying your monthly payment and continuing to bleed when you could have sold sooner. The sooner you realize your cheese has been moved, the sooner you will sell your home.

There may have been a time where a foreclosure here and a foreclosure there should not be considered when pricing a home. But the pervasiveness of foreclosures has brought down the “going rate” of nearly all homes which is why most current asking prices are pretty accurate.

It’s very important buyers find the right Realtor^® who will show them the true value of homes they are considering and who will explain to them that foreclosures are not the only bargain on the market. It is also critical that sellers find that same type of Realtor^® who will not blow smoke just to get the listing. Sellers must have a frank talk with their Realtor^® about the rapidly-changing market and that their home today is not worth what it was four years ago.