The “F Word” for Real Estate
categories: Alpharetta Real Estate, Foreclosures
While a lot of sellers want to use the real "F" word for this real estate market, my "F" word in this market is Foreclosure.
Everyone is fixated on foreclosures. Last week alone, I had three people contact me out of the blue looking for foreclosures…looking for a deal.
CLICK HERE TO SEE ALL CURRENT FORECLOSURES IN ALPHARETTA, ROSWELL, JOHNS CREEK and MILTON (The page may load slowly, there are a lot of them!)
While foreclosures are getting all the limelight in the press and while there are more and more of them on the market - there are going to be 7,335 properties auctioned next Tuesday in the 13-county metro Atlanta area , they may or may not be the best buy for you. My word of advise to you would be: Don’t fixate on foreclosures.
One of the people who contacted me wanted a 4 bedroom 2.5 bath home on an acre for around $250k. There are a few foreclosures that meet that criteria, but they are mostly junk. Understand that someone living in a $250,000 house and facing financial difficulties is not going to leave the home in tip top shape.
I told this prospective buyer that there are 65 homes in Alpharetta with 4 BR and 2.5 Baths (including one in Sable Pointe, an affordable neighborhood in Milton High School district, that has an acre lot) that are under $275,000. Some of them are nice, clean, well-maintained homes. Unfortunately, they aren’t attracting as many potential buyers becuase they don’t have the foreclosure label. Might we look at some of them as well?
Competition for Foreclosures is Higher than for Resales
Which brings me to competition. In the past four weeks, we have made offers for clients on three foreclosure homes. All three cases were multiple offer situations. We got two of the homes; lost the other. We offered slightly more than list price on the two that we got. Lesson: if a bank has a house listed at $300k, don’t think you are necessarily going to get it for $50k less - or even list price. The banks are in this for profit, too, or perhaps less loss.
Foreclosures Might Not be in the Best Condition
Foreclosure properties are sold "As-is." This means you have the right to inspect the property and can terminate the contract within your due diligence period if you don’t like what you find, but the bank is not going to make any repairs. On one of our recent foreclosure purchases, active termites were found. Apparently they moved in when the previous owners moved out. The previous owners had had a termite bond, but it expired with then left and it had been almost two years since any termite inspection or treatment had been done. You are going to find issues caused by neglect when you purchase foreclosure property…and remember, Georgia is a Buyer Beware state.
Our recent experience with foreclosures, particularly the competitiveness of them, is not unique. Another local agent told me last week that they had made three with a client on three different properties and not gotten any of them.
A local resident shared with me her experiences trying to buy three foreclosures recently. She bid on what I’ve always maintained was a great buy on Francis Road only to be out bid. The auction was held online and she told me that they kept calling for "highest and best" and people kept increasing their bids. The house finally sold for $560,200. It was listed at $599,900 at the time and had been listed at $699,900.
This resident also tried to buy a foreclosure in White Columns. She worked with the bank for two months and came up to within $10,000 of their list price. Five other offers then popped up; the house is currently under contract to someone else to close in May.
Then there was the pre-foreclosure in Providence at Atlanta National: not the monster house, which sold for $100k more than list in 12 days, but a much more traditional and modest home. The one I’m talking about is a big house with a finished basement in a gated Chatham, swim-tennis neighborhood.
It had been on the market for about a year and was last listed at $699,900. The bank wouldn’t budge on the list price. It went to auction on the courthouse steps and Wachovia, who held a $140k second mortgage on the house, bought it and left it on the market at $699,000 where it remains.
I could go on with more stories, but I think you are getting the point: Foreclosures may or may not be "a deal." There is significant competition in the market for them, so be prepared to pay list price if it is a good house. Also, the houses may have damage, visible and non-visible, like our little termite friends. Of course, the problem houses tend to get weeded out, but buyer beware.
Finally, the brokers representing the banks are likely doing it at a reduced commission for the volume. Therefore, the service can suffer sometimes and frankly the banks are very slow to respond, sometimes intentionally and sometimes unintentionally.
We have a foreclosure under contract and there was an issue dewinterizing the property: The main water didn’t come back on. We have spent over two weeks trying to get the bank to get someone to the property just to see what the problem might be.
So if you have no tolerance for bad service and poor communication, consider something other than the foreclosure market. Heck, we had an above list price offer in on a foreclosure and never even got a callback from the broker telling us we didn’t get the house. We had to read it in the MLS over a week after they took another offer.
Last tidbit: if the foreclosure market is for you, consider this little gem. Well…there you go. I went to check on it and it has a pending contract already. It was a house in Cobblestone Farms that had been on the market for $1.1 million as a foreclosure for a year. It had some damage - and I made the mistake of opening the refrigerator last summer, but was big, bold and an interesting floorplan. Plus it had a great lot for a pool. Anyway, I guess the bank decided it was time to cut bait and they reduced the price to $749k. It was under contract within weeks…who knows, there may have even been multiple offers at that price.
That is par for the foreclosure market.
Hi Kevin,
We actually made an offer on that Cobblestone property when it was listed at 1,500,000 early last year. The offer was right around the current asking price. Wonder how much the bank would have saved if they had accepted our offer???
Great post on the perils of foreclosures in Alpharetta.
Deryk
P.S. See you at caravan Spinach Man.
OK Kevin, you finally got me to delurk and post. Still haven’t put an offer on a home there yet-I’m even more averse to after I saw foreclosure filings up over 100% from this time last year. I will have to pull the trigger before school starts, though. A couple of comments:
-those Ellard properties blow my mind. Googling the tax records have some of them selling in the 1.5M range. There’s one going up for auction with US Home Auctions, starting bid 419k.
-I keep seeing that new home on Freemanville listed as a short sale with many different prices-999k, 899k, the last one 1.2M. Now its back off the market. Strange.
-I’m considering making an offer on the property in Six Hills. Lovely neighborhood, nice house, crummy lot. Only problem is, even if I get a great deal, I’ll still be paying high home taxes, which adds a big chunk of change each month. Also gotta factor in AC bills/repairs, etc, which makes the deal less good.
-I have never seen this many homes for sale in the crabapple area. Wow. Although not that many in Brierfield, which is usually has a bunch. A ton in Westminster. Lots in H2Oside. A ton in North Farm.
-Always been curious about the Atl National home. Does Wachovia have the 1st mortgage also? Again, the problem with that house is high taxes and really high swim/tennis fee=$2500. I’ve heard complaints about that high fee.
-Saw a NTS in St Michelle with a list price of 339k. If that sells on the courthouse steps for that price, that neighborhood will be back to 2001 prices.
-I am seeing a few things going under contract, but the ratio of pending/unsold still seems real high.
You got me to babble on good today. Anne
One more thing: it kind of bothers me when past appraisals are included in a home’s description. A past appraisal is exactly that-an event (in this case, price) that has happened in the past. A home, just like any other good, is only worth what someone is willing to pay for it now (I think in financial terms this is called present value). If it was “worth” 925k back in 4/08 and is listed for 750k now, it’s only worth 750k now (or less). Ok, let me hop off my soap box for now and get on with life. Anne
Interesting isn’t it. No matter what, people want a “deal”. In the hot market it was all about flipping and now it’s about foreclosures. Great article on the perils and rewards.
Michael