Common Foreclosure Sales Misconceptions

Although distressed sales (Foreclosures and Short Sales) account for over 50% of the California market right now, many home buyers still have a negative perception of them. I work with distressed sales on a daily basis all over the state of California and I see new buyers taking advantage of extraordinary opportunities buying distressed homes.

Here are some common misconceptions I hear from home buyers:

·         All distressed sales are in horrible condition.

Some distressed sales are in move-in-ready, turnkey condition. It is common for the new owner (HUD, Fannie Mae, a bank or investor of some kind) to rehabilitate the home to get a better sales price.

·         If you buy a distressed sale, you have to pay the back taxes and unpaid HOA fees.

Title insurance is required when you finance your new home. Title insurance will guarantee clear title free of the previous loans and liens. Beware if you plan to buy a foreclosure at auction off the court house steps. These purchases require cash and offer no guarantee of clear title. Make sure to research title prior if you decide to go this route.

·         Distressed sales always sell at a discount.

The price of a distressed sale depends on the same factors as a traditional sale. Buyers and sellers eventually determine the sales price. A distressed sale in a great location that’s move-in-ready will have multiple interested buyers. Multiple buyers with their multiple offers will push to sales price up. Many buyers make the mistake of assuming they are the only buyer making an offer on a distressed home and put in low ball offers only to be disappointed when another offer is accepted at a higher offer price.

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