Can you get a bargain by buying a bank owned foreclosure in Boston?
[Here is a guest post from Josh Muncey, one of the skilled buyer agents on my team here at Charlesgate Realty Group. Please enjoy his take on foreclosures, and if you have any questions, please comment below or contact Josh.]
I'm sure you've read all about the continued struggles of the Boston real estate market (especially in areas of heavy foreclosures). Maybe you're even looking for ways to capitalize on this foreclosure crisis that you hear about in the news every day? Are you wondering if you can buy a foreclosure in Boston for 50 cents on the dollar?
Well - I haven't seen properties selling for half of their market value, but with a little research and effort, I do think you can get about 80 to 90 cents on the dollar - possibly more in rare circumstances. There certainly are some good deals out there for a savvy buyer but there are some inconveniences associated with purchasing bank owned real estate in Boston that you may need to endure in order to make it happen:
- The property might be missing appliances. Appliances have a mysterious way of disappearing from foreclosed homes (unfortunately). And don't be surprised to see missing copper pipes and electrical wiring in some homes. Whether theft or vandalism, those are some things to look out for that could cost you money to fix or replace up front.
- You may need to remove the contingencies from your offer in order to be the winning bid. It's not just all about price. Banks are looking for "secure" deals without lots of contingencies. Banks look more favorably on offers without inspection contingencies and you may be able to get a property for tens of thousands cheaper if you have no mortgage contingency on your offer as well. They want these properties off the books quickly! However, even if you don’t put an inspection contingency in your offer you can still have one for informational purposes (which I would certainly advise doing). It may even be a good idea to bring a contractor or inspector by the house prior to making an offer.
- REO properties are sold “As is”. Be prepared to make repairs, and have some cash set aside for maintenance - you'll probably need it. Factor this in to your offer to make sure you're really getting the deal you expect.
- You need to act quickly and be prepared for a bidding situation. Foreclosures are a hot commodity for investors right now. The best foreclosures in Boston (value wise) typically sell very quickly and often stir up bidding wars. Typically, banks require homes to stay on the market 5 days prior to reviewing offers (to give potential buyers enough time to view the home). At that point, if the property is a great value, there will be multiple offers in and the bank will ask prospective buyers to submit their best and final offer before a certain deadline. Do your homework, know your bottom line, and be prepared to put your best foot forward.
- You will not be able to make adjustments to the purchase and sale agreement. The bank will use a boiler plate purchase and sale agreement with their addendum attached. Even if you have a real estate attorney that wants to make edits to the contract protecting your interests it is very unlikely the bank will allow that. You need to be ready to deal with that to get to the closing table.
If these issues don’t bother you and you can look beyond a messy property that probably needs a little bit of repair work, then you may be able to find a great investment. You are ready to explore the REO market in Boston for exciting opportunities.
Here are some REOs that have been on the market recently:
• 19 Adelaide Street #3 – $195,000 Jamaica Plain
A second floor 741 square foot condo with deeded parking and storage on a great street. Comparable properties in this building have sold for $240k and up! Granted the appliances are missing and the floors could use a good sanding, I would think that you would definitely recoup those costs in an investment if this were purchased and rehabbed.
• 11 Telegraph Street #1 – $203,900 South Boston
This 2 bed 1 bath on the East Side features 858 square feet, granite countertops, and hardwood floors. Typical renovated 2 beds on the east side of Southie are selling between $300-350k.
• 193 West Canton Street #4 - $394,900 South End
A rare REO property to come on market in one of the downtown Boston neighborhoods, this 700 square foot renovated penthouse is located on a centrally located South End Street with laundry in unit, working fireplace, granite/stainless kitchen and private roof deck overlooking the whole city! I had a client who bid on this property, so I saw the bidding war here first hand!
If you're thinking of buying a foreclosure, please begin by doing your homework first. Learn the neighborhoods and the streets where you want to buy, get great local advice on home values, and look at as many homes as possible to find the best value. I am happy to chat with you about foreclosures in Boston, and share the pipeline of properties in the pre-foreclosure process that may be coming on the market in the near future. Just contact me and let me know how I can help!
What do you think? Make a comment!
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