For those who want a foreclosure deal, wait!

Very good point. I just want to reiterate something you alluded too above - this applies equally to short sales.

In almost all case buyers will fare better if they wait until the bank actually owns the property, and it is a normal sale, only with an owner who desperately doesn't want to own the house and is not emotionally tied to it.

The myth that there is money to be made in short sales and foreclosures is based on the discounts they carry to prices over the last few years. But once again, that's not important - what is important is the price now, and most short sales I see are still priced too high to my mind.

And the fact that people are still anxious to get a "bargain" by buying these properties shows that there is still way too much confidence in the real estate market.

Me, I'm nervous about Mass Munis, let alone the real estate market. Many towns gave big contracts to their municipal unions in the good times which they are going to have a difficulties paying now.

There's a reason why yields on short term treasuries keep hitting Japan-crash levels lately - 1 bp! - and why LIBOR is so high. And the current LIBOR rates on VDRNs can't be making life any easier for the issuing authorities.

Rona - When do you think that the time will be right for buying foreclosed properties?
I have been involved with sales of numerous foreclosed propertries since the Spring. Often these properties have been purchased for 50 % of their value.
There are great opportunities out there. Discouraging people from buying these properties is doing a disservice to your buyers, the real estate industry, and this country as a whole.
These properties are causing the financial crisis. If these properties are sold ,everybody wins.

Rona's point is well taken. When the principal in a transaction is a lender, the decision-making process is going to be cloudy at best, given the restraints built into large organizational structures. This doesn't mean buyers should avoid these properties at all costs. You just have to be better prepared to manage what may not be a rational process - as is the case in most transactions between private citizens.

I'm the first to attack real estate agents, but the above attacks on Rona are just wrong.

First, I've never noticed her to peddle nonsense - she seems to try hard to do a good job.

Second, and most importantly, the actual advice Rona gave is very good. Attacking her for giving good advice is nonsensical.

All advice should be read with a critical eye, of course, that goes without saying. But I'd be curious, Jima, to hear of a property that sold for 50% of its value. And I'd tend to think you are a real estate agent yourself, no?

There is no such thing as money for nothing people. If foreclosures were really trading at 50% of their value, there'd be a line out the door of the courthouse to buy them, and I'd be in that line. The lack of that might tend to indicate something...

THis is relevant to the Govt bailout plan as well, I'm sad to say. Value is not what something traded at a year ago. Value is what something is worth today. And if no one is willing to pay more than 50% of the old price, guess what? That is the new price, not a bargain.

Let me correct what I stated in #4. Most private real estate transactions are a rational process of reaching a mutual agreement.

Jima,

I am seeing $10-30,000 discounts (less than 5% off) and high risk of deals falling through without compensation for expenses and time lost.

The time to buy a foreclosure is when the discounts are steeper (like they are in your area, apparently), and when the lender-sellers get their systems in order so that the process moves at a reasonable clip and propety management happens during pendancy.

Getting the lenders to give good deals on financing, like they did in the 1990s wouldn't be so bad either...

Rona,

You make some excellent points. I think there are buyers out there who are buying bank-owned properties without any representation, and they are assuming they are getting a good deal just because it is bank owned. It's rarely the case.

The fact is the really great deals are receiving multiple offers and are being snapped up in a day or two by contractors and other experienced investors.

If a bank-owned property is on the market for more than a month without a price change, it's not likely to be a very good deal.

Home buyers interested in short sales and bank-owned properties really need to have an experienced agent and/or lawyer guide them through the process and make them aware of the potential pitfalls.

i can't really figure out if you're talking only auctions and shortsales or reo's are included in this discussion but:

376 blue hills parkway, milton

to be honest i never personally inspected but from what i heard it's structurally solid and clean. last i heard there were in the ballpark of 25 offers and it went under agreement w/in a week. prior sale '06 $460k. ask $234k. the cap rate isn't great and we're not willing to accept the risk of price speculation in this market but it's instant if not possibly temporary equity if you're willing to occupy for a while.

REOS are different - you might actually get a deal there.

That said, to re-iterate, if a place had 25 offers, I'd say the price is the market price, there is no instant equity. By definition. So all you will get is normal appreciation plus whatever development premium. In this market, I'd say normal appreciation is negative.

But losing 10% off 234k is nicer than 10% off 460k, no doubt

You may pay less once the property is REO, but at that point the property may be worth much less as the former owners have been unhappy tenants for several weeks (or months). At least with a short sale, the owners still have an incentive to keep the property in good shape.

I think if you are looking for a pristine property none of these approaches are exactly the ideal...