Time to Bid on That Foreclosed Home

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NEW YORK (MainStreet) — The National Association of Realtors just published new data that calculates the savings from buying a foreclosed home at 15%. How can you find good home foreclosure deals?

There aren't many places to start looking, based on the most recent numbers. According to RealtyTrac, foreclosure filings are in decline – down 21% in Nov. 2010 to 262,339 for the month. Bank repossessions – where buyers can really get deals – accounted for about 67,000 of those foreclosure filings, RealtyTrac says.

Two more pieces of key foreclosure data from RealtyTrac:

  • Total current number of U.S. foreclosures = 2,176,306
  • Average price for a foreclosed home = $174,967

Other data show that now is a great time to look into foreclosures, if not make an offer. The National Association of Realtors says prices are down on foreclosure sales, but with fewer buyers looking around in the winter months, serious buyers have the field to themselves.

Foreclosures, which accounted for two-thirds of the distressed sales share, sold at a median discount of 15% in November, while short sales were discounted 10% in comparison with traditional home sales.

NAR president Ron Phipps, the broker-president of Phipps Realty in Warwick, R.I., said these buying opportunities will continue. “Traditionally there are far fewer buyers competing for properties at this time of the year,” he said, “so serious buyers have a lot of opportunities during the winter months. Buyers will enjoy favorable affordability conditions into the new year, although mortgage rates are expected to gradually rise as 2011 progresses.”

One school of thought says it’s actually the banks that are pricing foreclosed homes realistically, and that nostalgic homeowners are pricing their properties unrealistically high. That could explain (to a point) why foreclosures are priced lower these days. But desperation plays a part, too, and banks need to get these homes off their balance sheets to pump up their bottom line.

If you want to make a play for a foreclosed home, remember the following tips:

  • Thoroughly assess the property. Bring a home contractor onto the foreclosed property and conduct a complete inspection, checking for structural damage in particular.
  • Set a price for renovations. Know going in how much you’ll be paying for any necessary renovations. If the price exceeds that 15% below market price you can expect, start thinking about abandoning the deal.
  • Check out home sales in the neighborhood. Hook up with a local real estate agent and dig up comparable home prices in the neighborhood. If you’re still getting a great deal, even with renovations, it could be time to strike.

RealtyTrac offers free access to foreclosed homes across the nation. That’s a good way to start your search.

When you do, go in with your eyes open, and at least one hand guarding your wallet. You could be getting a great deal, but make sure before you sign the dotted line.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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