Why it’s dangerous to buy foreclosure properties from a Realtor

A foreclosure property is defined as a home and land that is legally given to the bank because the owner of the home did not meet their obligations on paying the debt. There is a crazy misunderstanding about foreclosure homes that makes people think that just because the home is a foreclosure, it will be a good deal. Please don’t listen to everything you hear. Let me tell you how this process usually works.

First, the home owner loses the home to the bank. Once the bank owns the home they will hire a real estate appraiser to come in and appraise the home. They will ask for a REO addendum that will identify four different values for the property “as is” value and “as repaired value” with normal marketing time and 90 day market time. Once they have this information, they will list the property according to what the real estate appraiser has appraised the home for.

Now you just found this home listed as a foreclosure and you think it is a great deal. Little do you know that the bank has a detailed appraisal and sometimes two separate appraisals telling them all of the repairs, the estimated cost of the repairs, realtor broker price opinions, and the whole enchilada? Do you think the bank is going to give you a “good deal?” Do you think the commission paid Realtor will give you a good deal? If you do, go poke your eye with a stick, because you might be dead.

If you’re buying homes from the Realtor and the Realtor is working with the bank, there is a high probability that you won’t get a good deal. Don’t look for foreclosure properties from a Realtor.

I’ve seen several cases in my career where the bank is asking full market value for a home that need repairs and fixing and in one case, I appraised a home that was a full $300,000 off from the value the owner wanted to pay and the owner was persuaded by the Realtor to proceed with the purchase. In my opinion, just like that, he lost $300,000 because he thought this was a good foreclosure deal. Six months later, the owner was trying to refinance his “good deal” I had two different lenders call me. Guess what. He was finding out the hard way why you shouldn’t always listen to your Realtor. Don’t let this happen to you.