Foreclosures have long been labeled a bargain hunter’s dream and reducing the swelling count is a key part of housing’s recovery. But a new Harris Interactive survey released Tuesday shows decreased enthusiasm for buying foreclosed properties amid concerns about aspects ranging from hidden costs to falling home values, delivering yet another blow to a crippled sector.Some people lock their pets in the homes, which will likely kill the pets?! The fact that so many full-grown adults will trash their homes before being evicted simply demonstrates that rather than being victims, they are often selfish, irresponsible people who don't deserve our sympathy.
“What’s significant about our findings is that just as the market is being flooded with more foreclosures, homebuyers are more hesitant to buy them,” said Pete Flint, co-founder and chief executive of Trulia.com, a real-estate search engine that released the study with foreclosure tracker RealtyTrac.
The survey shows 47% of adults surveyed, saying in November they would consider purchasing a foreclosed home, down from 54% in April. Meanwhile, 80% now express concern about the negative aspects of buying a foreclosed home, up from 69%.
Buying a foreclosure can be a hassle-filled process. Real-estate agents estimate about half of foreclosed properties to be sold by mortgage companies nationwide have substantial damage, The Journal reported earlier this year (”Buyer’s Revenge: Trash the House After Foreclosure“).
As Michael M. Phillips wrote, foreclosed homes were found with all sorts of problems, from missing pipes and appliances to damage done by previous owners upset losing their homes. Mr. Phillips described holes punched in walls, paint dumped on carpets and pets locked inside “to wreak further havoc.”
Thursday, December 18, 2008
As foreclosures increase, fewer people willing to buy them
From The Wall Street Journal:
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Another reason well-qualified and motivated buyers won't or shouldn't buy foreclosures is because of the ridiculous terms the banks put into the contracts of sale for these properties. They require buyers to waive tons of rights, and agree to questionable arbitration provisions. They should be unenforceable, but they're so ridiculous that any educated buyer wouldn't sign them.
ReplyDelete"Anony said...
ReplyDeleteAnother reason well-qualified and motivated buyers won't or shouldn't buy foreclosures is because of the ridiculous terms the banks put into the contracts of sale for these properties. They require buyers to waive tons of rights, and agree to questionable arbitration provisions. They should be unenforceable, but they're so ridiculous that any educated buyer wouldn't sign them."
Well of course they do, thats the whole reason you are getting a DISCOUNT when you buy a foreclosure.
Think of it this way, you are a bank - youve never seen the house, never lived in it, have no idea if the pipes rattle, or if the roof has a tendency to leak during wind driven rain from the SW. Suddenly, you "own" the house. Are you going to put a bunch of representations and warranties in the contract about the quality of the house? Hell no.
Lets say the law changes this. Lets say the law makes the banks enter into standard form contracts that protect the buyer. If Im the bank and Im gonna stick my neck out, yeah I will go over the house with a fine toothed comb before I sell it. But you know what else I will do? Since I now know it is a good house, I will price it at market - no foreclosure discount.
So in the end, it all comes down to risk based pricing. The bank can give you, the buyer every protection under the sun, but they will charge you 100% market value for it. Alternatively, the bank can say heres the house, I dont know shit about it - take it or leave it - 75% market value pricing.
There are a ton of educated consumers who understand this. There are a ton of educated consumers who have an eye for these places and are more than happy to take on the additional risk for the discounted price. Why should we take that right away from them?
"any educated buyer wouldn't sign them."
ReplyDeleteConsidering how many house owners are letting their houses go into foreclosure (the figure has been quoted as high as 1 in 10 nationally) how many 'educated buyers' were there really during the housing runup?
Uneducated house buyers (the remaining delusional flippers, knife catchers, Trump wannabes and families desperate to get into a house, Any house) will look past the problems and buy the foreclosure and try to make a go of the property.
There are still a few get rich quick con men selling their book/plan/CD on getting rich from foreclosures in spite of the fact that the housing bubble has burst and is still losing air.
There is a sucker born every minute, that is what the foreclosure selling banks are counting on.
"Well of course they do, thats the whole reason you are getting a DISCOUNT when you buy a foreclosure."
ReplyDeleteDiscount? Banks try to price them as close to market as possible so they can get at least most of their money back. Most of the foreclosures I've seen in this city are at exactly what the market price would be, sometimes even higher. They are not selling. If it were at a discount, I'd get the trade-off (and still not buy it), but there IS NO TRADE-OFF.
I don't expect them to make any representations or warranties about the property, but I'd prefer to not also be asked to sign away my constitutional right to a jury trial on top of taking the property as-is.
No discount - are you insane? If there is NO discount, why do they even use the words like distress sale? Why do appraisers exclude foreclosures from comps? Do you understand what "fair market value" means?
ReplyDeleteNext time I get my tax assessment, I will fight it by showing them assessed value on like kind foreclosure sales. When they object, I will tell them a dude on the internet told me there was no foreclosure discount. Get a clue...
Anonymous said...
ReplyDeleteNo discount - are you insane? If there is NO discount, why do they even use the words like distress sale? Why do appraisers exclude foreclosures from comps? Do you understand what "fair market value" means?
Next time I get my tax assessment, I will fight it by showing them assessed value on like kind foreclosure sales. When they object, I will tell them a dude on the internet told me there was no foreclosure discount. Get a clue...
A clue? You couldn’t buy one. Getting something at fair market value is not a discount. No, there is no “foreclosure discount”, be sure to tell your tax assessor that. Foreclosures do not bring down home values. They simply are an indicator of market value.
Robert - you are more clueless than that other guy was.
ReplyDelete"Getting something at fair market value is not a discount."
No shit. Did I say FMV was a discount? No! ReRead please...
"No, there is no “foreclosure discount”, be sure to tell your tax assessor that."
What the hell does this mean? Assume 2 identical houses one is a regular sale willing buyer willing seller the price is X. Assume the house next door is a foreclosure sale the price is less than X. What do you call this?
Perhaps I was not clear enough in my earlier response, but it was inteded to be ironic. Please re-read accordingly. If you choose to respond, please note I do tax appeals in MD, DE & PA as part of my livelihood, and I have no problem debating the finer points of the "foreclosure discount" with you.
By the way, I saw your analysis of the fair use doctrine the other day. I was going to refrain from saying anything, but since you piped up on my discussion with this anon, let me give you my two cents.
ReplyDeleteLets just say your analysis of the four factor test was an abomination. It clear you have never read Justice Story's opinion, much less any subsequent caselaw on the matter.
Personally, I would have looked into fair use of the Lereah photo under a "parody" sort of analysis, a la Campbell v. Acuff-Rose, but thats just me. As it stands, I think you would be better served sticking to subject matters where you have a better understanding of what you are talking about.
Perhaps I was not clear enough in my earlier response, but it was inteded to be ironic. Please re-read accordingly. If you choose to respond, please note I do tax appeals in MD, DE & PA as part of my livelihood, and I have no problem debating the finer points of the "foreclosure discount" with you.
ReplyDeletePlease, let’s debate.
“Foreclosure discount” Semantics. Semitics dreamed up by the REI and local municipalities to prop up housing prices.
During the boom, when folks were paying many price points over asking prices, this was simply touted by the REI as FMV or simply, it’s what the market will bear. Now that prices are falling, the talking points move to “foreclosure discount”, “distressed sales” While those may be descriptors, they are valid sales that are used (by educated buyers) as comps. Do those in the REI use them? Of course not. Is that any reason for a savvy buyer not to? Of course not. They are indications of market conditions and those prices must be used as comps to have a valid assessment of the market.
What the hell does this mean? Assume 2 identical houses one is a regular sale willing buyer willing seller the price is X. Assume the house next door is a foreclosure sale the price is less than X. What do you call this?
If the “willing” seller is not willing to sell at market prices, then is not a “willing” seller is he? Remove the descriptors. If the home that is at a higher price point does not sell, the market simply will not bear the price. When the home at a lower price point does sell, it is of a price point that the market will bear. Matters not if it’s a “cape cod”, “colonial”, “Regular sale”, “tudor” or “foreclosure”.
I see the irony in your post but, this mind set that home prices are dropping due to foreclosures is comical and should be addressed accordingly. If not, you’ll end up in the endless loop of non-linier thought of realtors, FBs and others desperate for housing prices to return to boom levels.
Prices are dropping because the market will not bear the price. The result of which are foreclosures.
With interest rates being low and rental rates drastically increasing, I imagine a lot of buyers, even the tidwads, are realizing angst about sitting on the sidelines for so long. I hope some of these tidwads miss out on buying homes, and end up entering the market well beyond the housing bottom. It serves them to set unrealistic goals.
ReplyDeleteYou are wishing misfortune on others, how hypocritical of you Lance.
ReplyDeleteSays a few things about what this boom was built on, and why it has to end the way it does.
ReplyDelete