The Paradox of "Foreclosure Value"

The request goes something like this "I know there are a ton of foreclosures in the area. I want to take advantage of one, but I want to make sure I am buying something that will definitely increase in value"

Don't get me wrong, I understand what they are trying to accomplish. But when a neighborhood (or community or town or county) is rife with foreclosures, the concept of "recovery " and "values" is a dicey one. The very reason you can get so many properties for so cheap is generally because there are just too many abandoned properties in that area. Value in those locations is hard to guarantee. I recently looked at what appeared to be a great deal for a client - until we saw that 11 other homes ON THE SAME STREET were in distress. Value? Probably not.

In Sarasota, we do not see nearly the REOs as they have in other parts of the state - and exceptionally few in higher end properties (over $100K). And when the true steal comes up, it is gone within minutes. This is not an exaggeration. Recently, I saw an REO the moment it hit the system. Recognizing immediately that it was a deal - priced at $275K, worth about $400K - I ran out to the property to take photos for my customers. I got there less than 1 hour from the time it appeared on the market.

I was one of 17 people on property.

By the time one of my clients expressed interest 3 hours later, the property was pending. Gone. A true deal does not last long. The media has made it sound like there are no buyers. But Sarasota is crawling with buyers.

I look at every opportunity for my buyers - and sometimes we get lucky with an REO and steal a property. But I still maintain that some of the best deals to be had are from traditional sellers. If they purchased prior to the boom, they likely have plenty of equity in their home and can afford to sell. You get a great deal, and the home has actually been maintained. Not only that - those homes arent getting nearly the attention of the REOs, which often end in bidding wars and higher prices.