This is my column for this week from the Arizona Republic (permanent link).
Foreclosure homes are sold “as-is” — but most need only minor restoration to bring them back to fully-livable condition
If we were to have a contest for the Valley’s most-gutted home, judging might take a while.
A significant number of homes for sale in the Phoenix area, especially at the low end of the price spectrum, are in the foreclosure process. Not all of these homes are in rough shape, but a lot of them are. At a minimum, buyers of short-sale or lender-owned homes should anticipate painting the walls and replacing the carpets.
But virtually all foreclosure homes will be sold “as-is.” This means, first, that any defects discovered in the inspection process will be the buyer’s responsibility to repair after close of escrow. But the “as-is” addendum also often implies that there may be serious deferred-maintenance issues.
Still worse, many lender-owned homes will have been looted, either by the former owners on their way out or by burglars. Missing ranges, microwave ovens and dishwashers are common. Air-conditioner compressors and hot-water heaters are also absent from many homes. It is not uncommon to see that all of the ceiling fans or all of the knobs on drawers and cabinets have been removed.
My pick for the most-gutted Valley home? The entire kitchen was gone — even the kitchen sink — and the air-handler had been removed from the attic.
I would not want to refurbish that last home, since there is no telling what else has been taken. But for most lender-owned properties, the cost of bringing the home back to livable condition is fairly low.
A new set of kitchen appliances is maybe $2,500. A brand new air-conditioner compressor is around $4,000. A decent water heater is perhaps $1,200 installed. Paint, carpet and tile in the high-traffic areas should run $5,000 for a typical suburban home, less if you do the work yourself.
There definitely are homes to avoid in this market, but there are many, many others that are selling for very low prices. These properties need only very minor restoration efforts to bring them back to fully-livable condition.
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J Boyer Morristown NJ says:
I love foreclosures in this market environment. I am buying a 4 bedroom house here in Morristown for 195K that needs about 40k in upgrades. If I wanted to sell it today, I could easily get 325K with the upgrades I am adding. Nice profit.
October 25, 2008 — 5:13 pm
James Wheelock says:
Greg,
I wish that the foreclosure opportunities that exist in Phoenix could be found here in Houston. REOs are being bid up very close to market price. With the best deals comming in at about 10% below market. After the necessary repairs are made you end up laying out just as much as if you would have purchased a home in perfect condition.
October 29, 2008 — 10:10 am
Alexis McGee says:
I dont know where Realty Trac is getting today’s numbers but they are down, down, down month over month and only a 25% increase november to november… the rest of the year has been 100%.
These recent foreclosure numbers, plus the National Association of Realtors Existing Home Sales and Pending Home Sales reports for the last two months show that housing markets may be stabilizing. You can’t call a bottom with two months of data, but we are absolutely headed in the right direction,
There definitely are a lot of ways to see this… I see opportunity.
November 14, 2008 — 12:54 am