mortgage

Selling in a sea of foreclosures

You need to sell your home as quickly as possible and for top dollar. But the only buyers in the market seem to be bottom-fishers who want to snap up a bank-owned property at a substantial discount. How can you sell your home when you're surrounded by foreclosures?

Foreclosures have been on the rise, according to data compiled by the Mortgage Bankers Association, and at least a few, if not many, foreclosed homes may be on the market today in just about any neighborhood, regardless of the residents' socio-economic status.

Sellers don't have many options in a strong buyer's market, but there are some tactics that can tip the balance between a sold home and what Realtors call a "stale listing," which refers to a home that has been on the market so long that buyers have become suspicious as to why no one has bought it.

Foreclosures aren't all alike
Home sellers need to understand that foreclosed homes, which are often referred to as real-estate-owned, or REO, aren't all the same and consequently don't all have the same impact on nearby homes that are for sale.

It's helpful to divide foreclosure properties into three groups, according to Dave Billings, West Coast regional director for Redfin, a multistate realty brokerage company.

3 groups of forclosure properties
  • "Pre-foreclosures" are homes on which the owner has fallen behind on the mortgage or which have already been taken back by the lender, but haven't yet been placed on the market.

  • "Auction foreclosures" are bank-owned homes that will be sold on the auction block. Auctions historically have been dominated by small numbers of experienced investors, but these days individual homebuyers may be found at auctions as well.

  • "Listed foreclosures" are bank-owned homes that have been listed for sale with a local realty broker. Oftentimes, these homes will be described in the local multiple-listings service, or MLS, as "bank-owned" or "lender-owned."

Real-estate brokers typically have access to plenty of information about the location, price and condition of listed foreclosures. But information about pre-foreclosures and auction foreclosures typically is much more difficult to obtain.

Banks that own foreclosed homes, asset managers that oversee those homes for the banks and Realtors who list those homes for sale may all have information about pre-foreclosures, but this market is very fragmented, so "all they would know about would be the property in their own inventory," says John J. Lynch, a broker with Keller Williams Realty Greater Cleveland West, in Westlake, Ohio.

Auction foreclosures typically aren't included in the MLS because they aren't listed for sale with a broker. However, the sales prices of these homes may be obtained after the auction through local tax records, which can be researched by enterprising buyers or can turn up when a comparable home is appraised.

The easiest way to identify possible pre-foreclosures and auction foreclosures is to drive around in the evening and look for homes that appear to be unoccupied. If the lights are never on and the grass has grown unusually high, the home may have been left vacant in advance of a foreclosure. A for-sale sign in a front window may be a good clue as well.

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