For many first time home buyers shopping around, the goal is often to buy the most reasonably priced home – and still have it suit their needs. And for the first time, the housing market is complete with short sales, foreclosures, estate sales and the traditional home sales. The question is: what type of home is best, and how are they different?
Well, according to a study reported by Zillow, foreclosed homes do sell for less than non-foreclosed homes. Depending on the area, foreclosed homes could sell for anywhere between 18% to 59% less than a non-foreclosure in the same market. The highest discount goes to Pittsburgh, PA, with a 59% difference between the prices on foreclosed versus non-foreclosed homes.
While each situation differs, and we can’t assign one reason for this discrepancy, there are two major culprits for the differences in pricing. For any home buyer that has walked through 30-40 homes during their shopping sessions, you can definitely see a difference between a foreclosed versus non-foreclosed home.
Foreclosed homes often show signs of distress. Homeowners may stop taking care of the home once they get behind on payments. On a side note: if you feel stretched financially, and are having trouble keeping up with your mortgage payments – don’t give up. Call your lender to see if they will work with you on late payments. Also be sure to check out President Obama’s loan modification program for a reduced mortgage rate.
Beyond the physical condition of the home, there’s also the difference of who’s selling it. Homeowners may price their home competitively, and do minor improvements to increase the value while banks will be less personal and detail oriented towards selling the home.
While foreclosed homes are by far the cheapest, short sales are also a great deal. You can usually tell if the home is a short sale if it says something like: sale subject to third party approval. The downside to short sales that have not been pre-approved is that it takes awhile for all parties to approve the sale amount. So you can place a bid and wait for months to find out if you got the house.
Regardless of which type of home you decide to buy, one thing is for sure – now is the best time to buy a home with all homes priced much lower than just three years ago. These great opportunities make this the best time to buy, but don’t hesitate too long, as waiting around can cost you thousands once these deals are gone.
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