Active Rain November 6, 2010

Everyone Wants Foreclosure Prices. Nobody Wants Foreclosures.

Deferred MaintenanceI got the following email today: 

we are withdrawing our offer of purchase on XX Rd.  The reason is the mold problem.  He is hearing that the mold goes right through to the studs and even the beams and he doesn’t want to subject his family to that.
I thought this was a good buy and I told him so but…

These people insisted that my client turn on all the utilities and de-winterize the house. They didn’t need all that done to know that there is mold. 

This isn’t an isolated example. Thanks to the media and basic groupthink of the current market, buyers are expecting not just great deals, but unbelievable ones. The problem is, in our area, most foreclosures are not recent builds or recent renovations. REO and short sale homes in New York are often the poster children for deferred maintenance and, upon occasion, vandalism. Yet 2/3 of the buyers I speak with mention foreclosures. Nine out of 10 people that see a few foreclosures have visceral, negative reactions to the condition. In cases where you have an ambitious soul who is handy and doesn’t mind a fixer upper, a chunk of them get the “in-law veto” where parents, friends or relatives put the kabosh on the transaction. 

It is our job to educate the public and manage expectations. In the case I first brought up, I got the distinct sense that the agent is hanging onto the people for dear life to make her commission. And that is not the posture to competently advise clients on the biggest transaction of their lives. 

In Westchester and surrounding areas, people stop maintaining their home long before they default on their home loans. By the time the home hits the market, you have old decks, old paint, old baths, and needed repairs put off with unpleasant consequences. Buyers need to understand this. In those rare cases where you do have a foreclosure in great condition, you’ll get wide interest based on scarcity, and the deal of a lifetime goes instead to the highest and best offer in a bidding war. 

You may have a cousin who just paid 50 cents on the dollar for the Taj Mahal in Las Vegas or Wichita. But this is New York, and it isn’t Kansas. I would advise any perspective buyer to stop getting educated by hearsay and national media and instead hang their hat on the the local expertise of their qualified buyer representative.