PVCC Puma Press

Buyers have various methods for acquiring a home in down market
By Kristen Vidulich, May 2009
Staff Writer

Are you in a financial position to buy a home? With short sales, foreclosed homes and auction houses available among standard listings, how do you know what will get you the best deal for your money? Realtors can offer some helpful insight into the information you will want to consider when purchasing a home.

Denise Miller, managing associate broker of Prudential American Associates in Cave Creek, Ariz., gives some background information on the different types of houses available for purchase:

• Short sales are homes just short of foreclosure; the owners owe more on the house than it is worth. The owners negotiate a deal with their lenders to appraise the house and sell it at value short of what they owe on the house. This, in turn, creates an opportunity for homebuyers to purchase that house at a better value. Arizona Regional Multiple Listing Service (ARMLS), an online multiple listing service for real estate agents, offers helpful statistics. Currently, there are short sales on the market, and in Cave Creek, for example, a 2,100-square-foot short sale listing with 4 bedrooms and 2.5 bathrooms is priced at $260,000 in an area where similar properties are listed at an average price of $362,000.

• Foreclosed homes are bank owned and unoccupied. The banks sell them below market value because they do not want homes; they want money. These homes can be negotiated down in price quite easily. The ARMLS shows a recently foreclosed home sold in March for $54,900 in the area of 28th and Glendale avenues where similar homes in the same area are priced at an average of $100,606.

• Auction houses are unoccupied houses up for auction and may be sold at a fraction of what they are worth.

Then, of course, there are standard listings on the market, which do not offer the best deals but are often in better shape than the previous options.

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There are benefits and downfalls to each,” says Miller. With foreclosed homes, since they are vacant, “they are likely to be stripped between time of signing the contract to time of closing,” says Miller. “It is an issue about 40 percent of the time.”

Miller had a vacant rental, and when she went to look at the property prior to renter’s move-in, she noticed the air conditioning unit was not working. When she called the repairman, he noticed the wires were cut and the unit looked as though it was about to be stolen.

“The thieves must have been interrupted,” said Miller.

While short sales are ideal because they are still occupied yet offering a reduced price, “they may take anywhere from 60 to 120 days for a bank to get back to the buyer with either an acceptance, a counter offer or to reject the offer. Then it takes additional time to close the property,” says Trish Ritchie, realtor at Prudential American Associates in Cave Creek. “These properties often require a lot of fixing up, much like a foreclosed home.”

Miller states that while auction houses seem like a steal to many, you must first do your research since it is not uncommon for the home to have liens and property taxes that the new buyer will inevitably incur.

“Auction houses are not your best bet; there’s just too many other options out there,” says Miller.

“Often times, with a standard listing (those not in danger of foreclosure), owners have emotional ties to the home and are less likely to negotiate good deals,” says Ritchie. “Price driven buyers and investors should lean towards purchasing bank owned properties, whereas buyers who are looking to buy a house they love and are planning on staying in longterm should lean towards standard listings.”