Top 10 Costa Mesa Real Estate Foreclosure Myths

 

There was a survey recently completed by real estate websites Trulia and RealtyTrac to give insight into the public’s perception of buying a foreclosure property. Here’s our Monday Top 10 Costa Mesa Real Estate Foreclosure Myths:
 

1. Foreclosures are “Fixers” that need a huge amount of work. 92 percent of consumers thought that if they bought a foreclosure, they would have to make a large number of home improvements before they could move in, with 65 percent being willing to invest 20 percent or less of the purchase price. Although many foreclosures need work, many foreclosed homes need only the basic cosmetic repairs that many new homeowners want like carpet and paint.

2. Foreclosures sell at huge discounts as compared to other homes. 95 percent of the surveyed group expected to pay less for a foreclosed home than for a standard sale; 18 percent had realistic expectations of less than a 25 percent discount. However, 36 percent expected to receive a bargain basement discount of 50 percent or more off the value of a similar non-foreclosure. In reality, foreclosures might be a great deal less than what the former owner paid or owed, their discounts are much more in line with today’s market value for similar homes.

3. Buying a foreclosure is risky. Half of respondents said they perceived buying a foreclosure as risky. The only time buying a foreclosure is risky is if you are buying it at the courthouse steps. Often in that type of transaction you have not seen the interior of the home or know if there are additional lines on the home. Buying a home through an agent on the MLS is no different than a standard sale/transaction – Title insurance is required and would insure the buyer is free and clear of any past debts of the old owner.

4. No inspections on a foreclosed home. If you are buying at the County courthouse auction, then this is the case. However, virtually all bank-owned properties ands short sales you can buy on the market would allow and encourage a buyer to perform a home inspection.

5. There are hidden costswhen buying a foreclosed home. 68% of survey respondents felt that there is would be possible hidden costs when buying a foreclosure. This is not the case with Costa Mesa real estate. There are some premiums when buying at the county auction (and occaionally some hidden liens), but if you buy thoough an agent on the MLS this is not the case; the closing costs are the same as they would be if you bought a non-foreclosed home. Overdue property taxes, HOA dues and other bills left behind by the defaulting homeowner are cleared by the bank that owns a foreclosed home before it is sold on the market.

6. Foreclosures are more likely to drop in value. Thirty-five percent of U.S. adults who believed there are downsides to buying foreclosed properties believed this myth. In fact, because foreclosures often offer a discount from the home’s current market value, they may offer some degree of insulation could certainly appreciate a greater amount because they were purchased at a discount. Any purchase will closely follow local Costa Mesa real estate market trends.

7. Most foreclosures happen when homeowners just walk away. Most homeowner would not walk away give the choice – 59% of respondents would not walk away given horrible circumstances. Most foreclosures happen when a mortgage holder loses his or her job or their mortgage adjusts to the point where they cannot afford to pay the mortgage, no matter how hard they try. Strategic or voluntary ‘walk-away’s are simply not as popular as many people think.

8. When you buy a foreclosure, you should lowball the bank – they are desperate to get these homes off their books. Stories about in the press abound about the large numbers of foreclosed homes the banks have on their books. You’ve probably heard about the bank’s “shadow Inventory” and that they don’t want to own these properties. People!! The banks like to hold their money as much as possible. They will simply not give the property away. Many bank-owned properties actually sell for above the asking price, and before a bank will take a lowball offer, they will almost always reduce the list price first, slowly and steadily to see if offers will come in.

9. You need to be able to pay in cash in order to buy a foreclosure. Only if you are buying at the courthouse steps is this true. If you are trying to buy a bank-owned home it definitley helps, but will not give you a “low-ball” discount many expect that cash commands. Some properties may be battered or in horrible shape, and in that case many lenders will not provide a loan. So in this case, cash is king.

10. It’s easier to buy a foreclosure with bad credit if you get a mortgage with the same bank that owns the property. Wrong! Why would the bank want to get in this situation again? They are having to liquidate a bad asset at a loss, why would they want to jump back into bed with another risky mortgage? Banks offer incentives for using their lending arm, but only to highly qualified individuals.

Thinking of buying a Costa Mesa short sale or a foreclosure? Call costa mesa real estate expert Colin Delaney at (714) 743-9882 or email me.