April 5, 2008: Looking for a bargain in Phoenix real estate? Add some elbow grease to your money and go for a bank-owned home
Last week we talked about how home sellers can command a premium price in the current Phoenix real estate market, even if they are competing with nearby foreclosure properties, by putting the home into turn-key condition.
So what's the counter-strategy? If you're a buyer looking for the best possible price, what should you do?
Go for the bank-owned homes, of course. Trying to buy a short sale can be heart-rending. The price listed in the MLS will be meaningless. The lender will decide what price to allow. Still worse, lenders drag their feet on short sales. If they have any hope of keeping the loan alive, they won't let the house go. Meanwhile, your own interest rate could be spiking, rendering you unqualified for the deal if and when it finally comes through.
By contrast, bank-owned homes (you might hear them called REOs, for "real estate owned") can race through the escrow process. Once a bank has foreclosed on a home, all it wants is to get it off its books and recover whatever cash it can, as quickly as it can. In consequence, your offer might be approved in just a couple of days, with the bank rushing the closing date any way it can.
Because of that, your loan qualification matters a lot. If you look shaky to the bank, it might pick a lower offer from a stronger borrower just to be assured of getting whatever money it can out of the deal.
And then there is the condition of the home. People losing their homes sometimes let the daily maintenance slide. Expect to see filthy carpets, scuffed-up paint, damaged doors. The air conditioner might have been removed and sold, or the water heater -- or even the kitchen sink.
In most cases, the bargain price you get for the home is going to be offset somewhat by the money you will have to put into it. But if you are handy and industrious, the profit on these expenses can be two dollars or more in value for every dollar you spend.
Greg Swann is the designated broker for BloodhoundRealty.com, a full-service Metropolitan Phoenix real estate brokerage. This article originally appeared in the West Valley regional sections of the Arizona Republic.
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