Chat Plus: Fair Prices and Distress Sales
Every other Friday, 1-2 p.m., Post Real Estate Editor Maryann Haggerty and I host a live chat about all things real estate. This is one of the good questions we couldn't cover on Friday.
Question: Hi. I am a buyer with a really great credit score, big down payment, etc. I really want to buy, but what I am finding is that the only properties that are priced fairly, that is, at non-peak prices, are the distressed ones (short sales or foreclosures). I really do not want to go that route because of the time and repair expenses involved. So do you think that if I don’t buy a short sale or a foreclosure, that I am overpaying?
ER: No, I don't. By definition, a distressed sale is one that happens at a discounted price because the seller is in a bad bargaining position. The seller is forced to take the low price because the seller has an urgent need to unload the property quickly. Even banks are distressed sellers when it comes to getting rid of their foreclosure inventory. They're losing money every day they own a home. And buyers, such as yourself, demand a discount when buying the grab-bag that is a foreclosed home.
MH: Try this mental trick: When you think of that low-priced distress sale, don't think of it as a $100,000 house. Think of it as a $100,000 house that needs $50,000 invested in it before you'll let your family live there. OK? Is it worth $150,000 to you? How about $150,000, plus a month of work? What else could you buy for $150,000? How much hassle will you put up with during that month of repairs? (All these numbers are just to be comprehensible -- maybe you're looking at $100,000 foreclosures, maybe $1 million ones.)
If you end up paying $160,000 -- and you can move in on closing day -- that could be a bargain in comparison.
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