Foreclosure or REO
When you see the word “foreclosure,” you often also see REO. REO clarifies that this is “real estate owned” by the bank. Foreclosure is actually a much broader term describing the entire process. Moving forward, we will use “foreclosure,” as a home being sold by the bank as a result of the previous owner not making their payments. I hope this clarifies.
Is a foreclosure a good deal? The answer is…it could be. The bottom line is that you really don’t know unless you can determine that is in good condition and below market value, or if after the cost of repairs, it will be valued at a price less than market value. What establishes the market value is the price of other recently sold like homes in that area. In other words, if most homes in the neighborhood, like the one that you are looking at, are priced around $150,000, and you find one for $140,000, then you are looking at a home $10,000 less than market value.
How do you know if they are “like” homes? There are many things to consider. The highest on the list are the size and the age. Of course, you can’t tell this from driving past the outside. Items like condition of the home, fireplaces, covered patios, flooring, roof and air conditioner come into play. This is why, during the course of purchasing the home, it is recommended that you get the home inspected. Ultimately, the appraiser will be the one who pinpoints the price for the lender, but initially, it will be your realtor that can tell you if it’s a good deal. Be sure to ask them. They will look at the “comps” or comparables to let you know.
Can you get the comps, yourself? The answer is…to some extent. There are many national and local websites that can help you determine the general value of a home. HOWEVER, it is known that they are often inaccurate, or too general. It is rare that they can give you the very specific information that you need to tell. It really is a good idea to find a realtor to help you with this process. I would love to help. I gain great joy from helping somebody find their perfect dream home. Please call me at (512) 560-9318, or email me at Connie@TrueDreamRealty.com. I welcome ALL questions. Thank you for your interest.